TNAG-1487-FCO40-2044-Hong-Kong-banking-Banking-Bill-1986-1986 — Page 266

Conclusion

Sir, I have described in some detail the main proposals in the Bill. They form a comprehensive package of what the Administration regards as essential to improve prudential supervision. It is fair to say that the

policies involved have the general support of the industry. But it is a long Bill; parts of it quite technical. During the considerable consultations that

took place, almost all bodies consulted emphasized the importance of

allowing time for careful scrutiny of the drafting of the Bill when

published. The Administration fully accepts this view. I propose,

therefore, to allow two months for detailed examination and

representation by interested bodies, before resumption of the debate in this Council: Amendments are likely to be required during the Committee Stage, and I welcome responsible advice. The Bill is of major importance for Hong Kong. It is essential to get it right.

I should add a note on the related subject of deposit insurance. I

said in my budget speech that whilst protection of depositors was important, practical difficulties make deposit insurance a non-starter in Hong Kong. The major banking groups would have to bear an unfair share of the burden. Furthermore, deposit insurance could not prevent the problems

of one bank spreading across the banking system as a whole as a result of

inter-bank relationships. The promotion of sound business practice through

improved prudential supervision is the only practical answer. This is the

unanimous view of the Banking and Deposit-taking Companies Advisory

Committees.

I believe that this Bill will go a long way - and an overdue way

to strengthen our financial sector. But as I said in my budget speech, there

is no foolproof system. We must depend on honest practices. The

Commissioner and his staff can guarantee their best endeavours, but they