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result, it has been represented to us that some loans of money which are not really deposits in the normal sense might be caught unwittingly: these are loans on terms referable to the provision of property or services, and loans by one company to another, both companies being in the same group, but neither being an authorized
institution. The definition of deposits will therefore be amended accordingly.
Clause 2(1): Definition of perpetual subordinated debt
7.
Perpetual subordinated debt is one of the recent innovations in the rapidly changing financial marketplace. It is (some say) as sound as equity capital, and comes into the Bill as part of the capital base in calculating the capital adequacy ratio, and, for consistency, it is treated as equity capital when authorized institutions hold it as an asset, subject to the limitations on shareholdings in clauses 87 and 88. Because of the difficulties in drafting a satisfactory definition of this type of instrument, the proposal now is to introduce a new schedule listing the actual debt issued which is recognised by the Commissioner for this
purpose.
Clause 7(2): Commissioner's guidelines
It
8.
One of the important and new provisions in the Bill is clause 7, which spells out the functions of the Commissioner. It reflects an approach to prudential supervision that relies more on the Commissioner's discretion and qualitative judgment than previously. has been suggested that the Commissioner should issue guidelines to the industry on how he will exercise his functions under various provisions. Although there is nothing to prevent him from doing so under the Bill as drafted, the Administration accepts that it would be useful explicitly to provide for that through an
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