TNAG-1266-FCO40-1615-Economic-policy-in-Hong-Kong-1983 — Page 38

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damage to the financial sector than has been caused by the

recent failure of a few companies. Moreover, some of the

smaller banks themselves would have been at risk, which is

of much greater consequence. I am sure that when the adjustments

are over and the dust has settled, we shall end up with a system

which provides both better protection for depositors and a

sounder general structure.

18.

I am of course very much concerned by recent events

and my branch of the Government is considering how as a result

of recent experiences, our present system, structural or

supervisory, can be improved. We shall be looking at this question carefully and if inadequacies are identified which are capable of improvement, then, subject to the usual consultative

process, corrective action will be taken. But it must be re-

cognised that bureaucratic interference and control beyond what is necessary, can be damaging to the financial sector and the economy as a whole, and that no matter how stringent controls are, malfeasance and poor management on the part of financial

institutions can never totally be avoided.

19.

*

May I conclude by summarising what I have said. The main point I have attempted to make is that, in the circumstances of today, the problems which some deposit-taking companies have recently experienced might have been considerably worse had it not been for the introduction of the three-tier system, because small companies would have found survival very much more difficult if the banks had abandoned the interest rate agree- ment, or if deposit-taking companies had been required to comply with that agreement. I have also pointed out that in the minds of many bankers, the rule which now prevents registered dtc's from taking deposits up to 3 months has existed since 1964, and that it is not, therefore, something new. Although some will contest this view it is a point which should not be overlooked because it must have been clear to everybody concerned that

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