XN000022-1992-05-20 — Page 3

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WEDNESDAY, MAY 20, 1992

SECRETARY FOR MONETARY AFFAIRS ON DEPOSIT PROTECTION SCHEME

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MR DEPUTY PRESIDENT:

HAS,

I AM MOST GRATEFUL TO THOSE MEMBERS WHO HAVE SPOKEN. THIS I BELIEVE, BEEN A THOUGHTFUL, INTERESTING AND USEFUL DEBATE. WE ARE MAKING CAREFUL NOTE OF WHAT MEMBERS HAVE SAID AND WILL TAKE THEIR VIEWS INTO ACCOUNT WHEN WE COME TO CONSIDER HOW WE SHOULD PROCEED WHEN THE CONSULTATION PERIOD CLOSES AT THE END OF THIS MONTH.

I SHALL REFRAIN FROM COMMENTING ON SPECIFIC POINTS WHICH MEMBERS HAVE MADE, AS TO DO SO MIGHT PRE-EMPT OUR PROPER EVALUATION OF ALL THE SUBMISSIONS WHICH WE RECEIVE DURING THE PERIOD OF CONSULTATION. NEVERTHELESS, I FEEL I SHOULD SET THE RECORD STRAIGHT ON TWO IMPORTANT POINTS.

FIRST, I MUST AGAIN STRESS THAT THE GOVERNMENT HAS NOT YET DECIDED WHETHER OR NOT A DEPOSIT PROTECTION SCHEME SHOULD BE INTRODUCED IN HONG KONG. AS THE CONSULTATION PAPER WE HAVE ISSUED IDENTIFIES, AND HAS BEEN REFLECTED IN THE VIEWS EXPRESSED BY MEMBERS, THE SUBJECT IS A COMPLEX ONE TO WHICH THERE ARE NO EASY ANSWERS. DEPOSIT PROTECTION SCHEMES HAVE THEIR DISADVANTAGES AND LIMITATIONS AS WELL AS THEIR ADVANTAGES. THERE IS A NEED, THEREFORE, TO WEIGH THESE CAREFULLY, TAKING INTO ACCOUNT THE PARTICULAR CHARACTERISTICS OF HONG KONG, BEFORE WE CAN DECIDE WHETHER SUCH A SCHEME WOULD BE APPROPRIATE FOR US.

THIS IS WHAT WE WILL BE DOING ONCE THE CONSULTATION PERIOD IS OVER, TAKING CAREFUL ACCOUNT OF ALL THE SUBMISSIONS WE HAVE RECEIVED. IF THERE ARE THOSE WHO HAVE YET TO PUT IN A SUBMISSION BUT WISH TO DO 80, I WOULD URGE THEM TO DO SO AS SOON AS POSSIBLE, AS THEY ONLY HAVE UNTIL THE END OF THE MONTH. IT HAS BEEN SUGGESTED THAT, DESPITE THE WIDE PUBLICITY THE CONSULTATION PAPER RECEIVED, THERE ARE MANY WHO ARE STILL NOT AWARE THAT THEIR COMMENTS HAVE BEEN SOUGHT. IF THIS IS So, THIS DEBATE MAY WELL HAVE HEIGHTENED AWARENESS OF THE SUBJECT. THE MONETARY AFFAIRS BRANCH HAS AVAILABLE AMPLE COPIES OF THE PAPER IN BOTH ENGLISH AND CHINESE AND WILL BE HAPPY TO PROVIDE THEM TO ANY WHO ARE INTERESTED.

ADDRESSING SOUND AND STANDARDS.

THE MAJOR

SECONDLY, I WISH TO REFUTE ANY SUGGESTION THAT THE GOVERNMENT EMBARKED ON THE CONSULTATION EXERCISE AS A SUBSTITUTE FOR ANY SHORTCOMINGS IN OUR SUPERVISORY SYSTEM. WE HAVE A EFFECTIVE REGULATORY FRAMEWORK FULLY MEASURING UP TO WORLD OUR BANKS ARE IN GOOD HEALTH, PROFITABLE AND WELL-MANAGED. REFORMS WE INTRODUCED TO THE MID-1980S HAVE FULLY PROVED THEIR WORTH AND HAVE ENABLED OUR BANKING SYSTEM TO EMERGE UNSCATHED FROM SEVERAL SUBSEQUENT SHOCKS. LET ME REITERATE THAT THE PROBLEMS WHICH AFFECTED BCC (HK) AROSE OUTSIDE HONG KONG AND SHOULD NOT BE ATTRIBUTED TO DEFICIENCIES IN OUR REGULATORY SYSTEM. FURTHERMORE, THE BCCI GROUP CAME TO HONG KONG BEFORE OUR REGULATORY SYSTEM WAS REFORMED AND BEFORE THE COMMISSIONER HAS HIS PRESENT POWER IN RESPECT TO THOSE WHO COULD CONTROL AND RUN BANKS.

/THIS SAID