XN000022-1994-08-26 — Page 3

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FRIDAY, AUGUST 26, 1994

DEREGULATION OF IRR TIME DEPOSITS TO BEGIN IN OCTOBER

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THE HONG KONG MONETARY AUTHORITY (HKMA) WELCOMED THE DECISION BY THE HONG KONG ASSOCIATION OF BANKS (HKAB) TODAY (FRIDAY) TO BEGIN REMOVING THE INTEREST RATE CAP ON TIME DEPOSITS IN OCTOBER THIS YEAR.

ACCORDING TO HKAB'S TIMETABLE, IT IS ESTIMATED THAT ABOUT 40 PER CENT OF THE EXISTING TIME DEPOSITS GOVERNED BY THE INTEREST RATE RULES (IRR) WILL BE DEREGULATED BY OCTOBER 1994, 85 PER CENT BY JANUARY 1995 AND 95 PER CENT BY APRIL 1995.

"THIS IS QUICK AND POSITIVE ACTION ON THE PART OF HKAB, DEMONSTRATING THEIR SINCERE COMMITMENT TO PUT INTO EFFECT THE CONSUMER COUNCIL'S PROPOSAL WHICH HAS BEEN ENDORSED BY THE GOVERNMENT TO REMOVE THE INTEREST RATE CAP ON TIME DEPOSITS.

"COMMENCEMENT OF THE PHASING-OUT PROGRAMME IN OCTOBER IS AHEAD OF THE CONSUMER COUNCIL'S PROPOSAL TO REMOVE THE CAP ON TIME DEPOSITS IN 1995, SAID MR JOSEPH YAM, THE CHIEF EXECUTIVE OF THE HKMA.

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ON THE DEREGULATION OF 24-HOUR CALL DEPOSITS, HKMA ENDORSES THE STEP-BY-STEP APPROACH ANNOUNCED BY HKAB IN VIEW OF THE POSSIBLE IMPACT ON SAVINGS DEPOSITS.

EACH STEP IN LOWERING THE DEPOSIT SIZE THRESHOLD FOR 24-HOUR CALL DEPOSITS WOULD BE CONDITIONAL UPON THE HKMA AND HKAB BEING SATISFIED THAT THE STABILITY OF THE MONETARY AND BANKING SYSTEMS WOULD NOT BE UNDERMINED.

"IT IS JUSTIFIABLE TO BE MORE CAUTIOUS WITH 24-HOUR CALL DEPOSITS IN VIEW OF THE POSSIBILITY OF A MIGRATION FROM SAVINGS DEPOSITS. WHILE WE ARE COMMITTED TO LIBERALISATION, WE NEED TO ENSURE THAT IT WOULD NOT EXPOSE BANKING STABILITY TO EXCESSIVE RISK, SAID MR YAM.

ON JULY 26 THIS YEAR, THE GOVERNMENT ISSUED A RESPONSE, BASED ON A STUDY UNDERTAKEN BY HKMA, TO THE CONSUMER COUNCIL REPORT ENTITLED "ARE HONG KONG DEPOSITORS FAIRLY TREATED?".

THAT THE ON TIME BEEN

IN THE RESPONSE, THE GOVERNMENT CONCLUDED, INTER ALIA, CONSUMER COUNCIL'S PROPOSAL TO REMOVE THE INTEREST RATE CAP DEPOSITS IN 1995 WAS ACCEPTABLE. HKAB AND HKMA HAVE SINCE DISCUSSING THE TIMETABLE FOR PUTTING THIS INTO EFFECT.

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