XN000022-1995-02-22 — Page 39

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(a)

(b)

(c)

to establish the Monetary Authority as the authority responsible for the authorisation, suspension revocation of all three types of authorised institutions, including new powers to suspend a licensed bank;

to improve the checks and balances in the authorisation arrangements by distinguishing more clearly the administrative and appellate functions;

and

to improve the transparency in the authorisation arrangements by setting out more clearly the criteria which would be used for the authorisation and revocation of all three types of authorised institutions.

The proposal for vesting full responsibility for authorisation matters in the Monetary Authority would be in line with the objective of enabling the Governor in Council to focus on important policy issues. It would also be consistent with the Monetary Authority's central banking role of maintaining the general stability of the banking system and with the practice in other leading financial centres.

The proposed transfer of powers from the Governor in Council and the Financial Secretary to the Monetary Authority would also improve the checks and balances of the authorisation provisions in the Ordinance. The three authorities would play distinctive roles under the new structure: the Monetary Authority would be responsible for administering all authorisation matters; the Financial Secretary would provide a check as the Monetary Authority would be required to consult him on important authorisation decisions; and the Governor in Council would act as the appellate body for hearing appeals against the decision made by the Monetary Authority.

This represents a significant improvement over the existing system where there is no appeal against a decision of the Governor in Council to refuse to grant, to revoke or to attach conditions to a banking licence. These decisions would be subject to appeal under the proposed structure.

Under the revised regime, it is important that the Monetary Authority should be seen to operate within clearly defined statutory criteria for authorisation, suspension and revocation. This would be achieved by introducing the new Seventh and Eighth Schedules to the Ordinance clearly setting out the specific criteria to be applied by the Monetary Authority.

The Bill also deals with the powers of the Monetary Authority to take control of an institution. The powers are based on similar powers introduced into the Insurance Companies Ordinance in 1992. The main objectives of the powers are -