XN000022-1988-05-12 — Page 6

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THURSDAY, MAY 12, 1988

"AGAINST THIS BACKGROUND,

MAKES RULES

HOW

HE SAID, "IF THE НКАВ SO THAT ITS MEMBERS CAN TAKE DEPOSITS AT NEGATIVE INTEREST, CAN THIS BE CONSIDERED TO BE ULTRA VIRES?"

LEAVING ASIDE THE POINT ABOUT LEGALITY, MR YAM SAID CLEAR FROM THE EVENTS AFTER THE MAKING OF THE RULES BY HKAB RULES HAD BEEN VERY EFFECTIVE IN RESTORING ORDER THE BUSINESS OF BANKING IN HONG KONG,

TO THE

THEN

IT SEEMED THAT THE CONDUCT OF

"SPECULATORS HAD TO UNWIND

POSITIONS, ENABLING

THEIR LARGE HONG KONG INTEREST RATES TO RETURN то MORE

DOLLAR REASONABLE

LEVELS," HE SAID.

FUELLING

SYSTEM AN WITH

IN THE ABSENCE OF THESE RULES,

HE ADDED, THE BANKING WOULD HAVE CONTINUED TO BE FLUSHED WITH EXCESS LIQUIDITY, ECONOMY WHICH WAS ALREADY EXPERIENCING SIGNS OF OVERHEATING INFLATION THREATENING TO ACCELERATE.

"I HOPE NEGATIVE INTEREST RATES WILL NEVER BE IMPLEMENTED, I AM FIRMLY OF THE VIEW THAT IF SPECULATION ON A HONG KONG DOLLAR THREATENS THE STABILITY OF OUR SHOULD BE BROUGHT IN WITHOUT HESITATION,

BUT

BANKING

REVALUATION OF

THE SYSTEM THEY

HE SAID.

INTENTION

LENDERS ORDINANCE

MR YAM ALSO SAID THAT IT WAS THE GOVERNMENT'S INTRODUCE A LEGISLATIVE AMENDMENT TO THE MONEY THAT AUTHORISED INSTITUTIONS UNDER THE BANKING ORDINANCE WOULD NOT SUBJECT TO THE PROVISION IN THE MONEY LENDERS THE MAXIMUM LEVEL OF INTEREST RATES ALLOWED.

ORDINANCE RELATING

HE POINTED OUT THAT UNDER THE MONEY LENDERS ORDINANCE, IT AN OFFENCE FOR ANY PERSON TO LEND OR OFFER TO LEND MONEY AT EFFECTIVE RATE OF INTEREST EXCEEDING 60 PER CENT PER ANNUM.

ΤΟ

SO

BE

TO

WAS

AN

KONG WHATEVER

HE SAID THE MAXIMUM INTEREST RATE GAP BETWEEN THE HONG DOLLAR AND THE U.S. DOLLAR WAS THEREFORE 60 PER CENT LESS WAS THE INTEREST RATE FOR THE U.S. DOLLAR.

ADEQUATE FOR

"UNDER PARTICULAR CIRCUMSTANCES, THIS MAY NOT BE THE PURPOSE OF STEMMING A

OUTFLOW FROM THE HONG KONG DOLLAR.

H

SPECULATIVE

AIMS

'GIVEN THAT THIS PROVISION IN THE MONEY LENDERS ORDINANCE AT LOAN SHARK ACTIVITIES IT SHOULD NOT, IN MY OPINION, BE APPLICABLE TO INTERBANK ACTIVITIES," HE SAID.

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