TNAG-1266-FCO40-1615-Economic-policy-in-Hong-Kong-1983 — Page 37

9 -

responsibility. This was deliberate, because no government

can protect the public completely against malfeasance and poor

management.

16.

And so we come to the 1981 amendments to the Banking

and Deposit-taking Companies Ordinances. Those of you who

have followed the very well documented debate on the subject

closely enough will remember that it was in recognition of

the Government's responsibilities for the financial sector as a

whole and of the monetary policy considerations I have mentioned

that the three-tier system was introduced in 1981. I do not think

it is necessary for me to go into this in any detail today, even

if I had the time to do so, but I recommend those who wish to

understand the thinking at the time to read the speeches which

the then Financial Secretary made on this subject in the Legislative

Council on 29th April 1981.

17.

It is of course unfortunate that this phase of the

restructuring exercise should coincide with a slow down in

economic activity generally and sharp downward adjustments

in property and land prices in particular, which have been major

possible

reasons other than malfeasance leading to the failure of a few

registered deposit -taking companies, but this could not have been

foreseen in April 1981. The requirement under the three-tier

structure for deposit-taking companies to run down all short-

term deposits by June this year may well have contributed to

these problems, but I am not convinced this was the critical

factor. I am, however, certain that had nothing been done to

stop the erosion of bank deposits the resulting 'cut throat'

caused much greater

competition for deposits would have

/damage...