XN000022-1992-05-06 — Page 7

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WEDNESDAY, MAY 6, 1992

THE 1991 BEARING IN

AS FAR AS THE FAILURE OF BCCHK IS CONCERNED, THE RELEVANT INFORMATION IS ALREADY IN THE PUBLIC DOMAIN, INCLUDING COMMISSIONER OF BANKING'S REPORT TO THE GOVERNOR DATED 30 JULY AND THE COMMISSIONER OF ADMINISTRATIVE COMPLAINTS' REPORTS, MIND THAT THE COMMISSIONER OF ADMINISTRATIVE COMPLAINTS WAS GIVEN UNRESTRICTED ACCESS TO GOVERNMENT INFORMATION IN THE TWO COMPLAINTS HE INVESTIGATED.

AS REGARDS THE BANKING SYSTEM IN GENERAL, THE CLOSURE OF BCCHK LAST JULY HAS UNDERSTANDABLY CAUSED A GREAT DEAL OF DISTRESS. THIS IS A MATTER WHICH HAS BEEN OF GREAT CONCERN TO US ALL EVEN THOUGH THE ORIGINS OF THE CRISIS LAY OUTSIDE HONG KONG. THE INCIDENT, HOWEVER, DID NOT REFLECT ON THE FUNDAMENTAL SOUNDNESS OF OUR BANKING SYSTEM, WHICH HAS WITHSTOOD MANY SERIOUS TESTS. AND I MAY ADD THAT I DO NOT FIND ATTRACTIVE OR FAIR, RESPECTABLE OF SOME OF THE COMMENTS IN THIS DEBATE. COMMENTS ABOUT THE PROFESSIONAL JUDGEMENT AND EXPERTISE OF THOSE INVOLVED AND EVEN THE STATEMENT THAT SOME CIVIL SERVANTS MAY HAVE DELAYED THE CLOSURE SO AS TO TAKE ADVANTAGE OF INSIDE KNOWLEDGE TO REMOVE THEIR DEPOSITS. THESE ARE VERY SERIOUS STATEMENTS. THE ACCUSATION WAS MADE THAT THOSE INVOLVED WAS SIMPLISTIC FOR PLAYING A NUMBER'S GAME. I LEAVE IT TO THE PUBLIC TO JUDGE WHO IS TAKING A SIMPLISTIC VIEW OF THIS COMPLEX ISSUE, THAT SAID, I AM GRATEFUL THE MANY OTHER BALANCED AND SUPPORTIVE COMMENTS IN THE DEBATE.

FOR

A CLEAR DEMONSTRATION OF THE INDUSTRY'S SOUNDNESS WAS THE BANKS' ABILITY TO SWITCH TO THE BASLE CAPITAL ADEQUACY FRAMEWORK THE

AT END OF 1989. THIS CHANGEOVER WAS A FULL THREE YEARS BEFORE THE TARGET DATE FOR IMPLEMENTATION. SINCE THE MAJOR REGULATORY REFORMS WERE IMPLEMENTED IN THE MID-1980S, OUR BANKING SYSTEM HAS SUCCESSFULLY RIDDEN OUT SEVERAL PERIODS OF DIFFICULTIES, INCLUDING THE WORLDWIDE STOCK MARKET CRASH OF 1987 AND EVENTS IN CHINA IN 1989 AND INDEED THE AFTERMATH OF THE CLOSURE OF BCCHK. EMERGING FROM THESE DIFFICULTIES UNSCATHED THE BANKING SYSTEM HAS DEMONSTRATED ITS STRENGTH AND RESILIENCE AND CONTINUES TO GROW FROM STRENGTH TO STRENGTH.

IT MAY BE NOTED THAT ALL THE BANKS WHICH WERE THE SUBJECT OF UNFOUNDED RUMOURS LAST SUMMER HAD PARTICULARLY GOOD YEARS IN 1991 BOTH IN TERMS OF THE GROWTH OF BUSINESS AND PROFITABILITY. IN FACT, 1991 WAS AN EXCEPTIONALLY GOOD YEAR FOR THE BANKING SYSTEM IN GENERAL.

I HARDLY NEED TO SAY ANYTHING MORE ABOUT THE STRENGTH AND STABILITY OF OUR BANKING SYSTEM. THAT STRENGTH COULD NOT EXIST WITHOUT AN EFFECTIVE SUPERVISORY REGIME, AND WE CAN BE PROUD OF OUR REGULATORY FRAMEWORK WHICH COMPARES FAVOURABLY WITH THOSE IN OTHER FINANCIAL CENTRES. LET ME REITERATE THAT THE BCC GROUP'S PROBLEMS DID NOT ARISE IN HONG KONG. IT SHOULD NOT BE FORGOTTEN THAT THERE WERE IN ALL SOME 70 JURISDICTIONS ADVERSELY AFFECTED BY THE BCC CRISIS. IT IS ALSO NOTEWORTHY THAT PRESENT INDICATIONS ARE THAT THE POSITION OF BCCHK WAS MUCH MORE FAVOURABLE THAN THAT OF THE REST OF THE GROUP. IT HAS BEEN ESTIMATED THAT, LEAVING ASIDE ANY CASH INJECTION BY THE ABU DHABI GOVERNMENT, THE CREDITORS OF BCC1 S.A. AND BCC OVERSEAS WILL ONLY BE LIKELY TO RECEIVE DIVIDENDS OF AROUND 10% OVER A LONG PERIOD OF TIME. BCCHK DEPOSITORS, HOWEVER, HAVE ALREADY RECEIVED AN ADVANCE PAYMENT EQUAL TO 25% OF THEIR DEPOSITS UP TO A MAXIMUM OF FURTHERMORE,

$500,000. THE LIQUIDATOR OF BCCHK HAS INDICATED THAT HE HOPES PAY A FIRST ACROSS-THE-BOARD DIVIDEND HERE IN THE REGION OF ABOUT FOUR MONTHS' TIME WITH THE DISTINCT POSSIBILITY OF A DIVIDEND OR FURTHER DIVIDENDS BEING PAID DURING THE COURSE LIQUIDATION.

TO 40% IN FURTHER

OF

THE

/WE MUST