A186
Ord. No. 27/86
"value" means-
(Cap. 29.)
Advance against security of own shares, etc.
Limitation on
advances by
authorized institutions.
BANKING
(a) in the case of shares in a company other than a trust company registered under Part VIII of the Trustee Ordinance, the total of the current book value and the amount for the time being remaining unpaid on the shares; and
(b) in any other case, the current book value.
(2) In determining the paid-up capital and reserves of an authorized institution for the purposes of this Part, there shall be deducted any loss disclosed in the most recent balance sheet of the institution lodged with the Commissioner under section 60(2).
(3) For the purposes of sections 83, 84 and 85, "unsecured" means granted without security, or, in respect of any advance, loan or credit facility granted or financial guarantee or other liability incurred with security, any part thereof which at any time exceeds the market value of assets constituting that security; and "security" means such security as would, in the opinion of the Commissioner, be acceptable to a prudent banker.
(4) In relation to any authorized institution that is incorporated outside Hong Kong, this Part shall apply, save for the purpose of determining the paid-up capital or reserves of the institution, only to its principal place of business in Hong Kong and its local branches, and shall do so as if that principal place of business and those branches were collectively a separate authorized institution.
80. (1) An authorized institution shall not grant any advances, loans or credit facilities, including irrevocable documentary letters of credit to the extent to which they are not covered by marginal cash deposits, or give any financial guarantee or incur any other liability, against the security of its own shares.
(2) An authorized institution shall not, except with the approval in writing of the Commissioner, which approval shall be subject to such conditions as the Commis- sioner may think proper to attach thereto, grant any advances, loans or credit facilities, including irrevocable documentary letters of credit to the extent to which they are not covered by marginal cash deposits, or give any financial guarantee or incur any other liability, against the security of the shares of
(a) any holding company of the institution;
(b) any subsidiary of the institution; or
(c) any other subsidiary of any holding company of the institution.
(3) Every director and every manager of an authorized institution which contravenes subsection (1) or (2) commits an offence and is liable---
(a) on conviction upon indictment to a fine of $100,000 and to imprisonment
for 12 months; or
(b) on summary conviction to a fine of $50,000 and to imprisonment for 6
months.
81. (1) The financial exposure of an authorized institution to
(a) any one person;
(b) two or more companies which—
(i) are subsidiaries of the same holding company; or
(ii) have the same controller (not being a company);
(c) any holding company and one or more of its subsidiaries; or
(d) any one person (not being a company) and one or more companies of
which that person is the controller,
shall not exceed an amount equivalent to 25 per cent of the paid-up capital and reserves of the institution.
BANKING
Ord. No. 27/86
A187
(2) The financial exposure of an authorized institution to any such person, company or combination thereof as is referred to in subsection (1)(a), (b), (c) or (d), shall for the purposes of this section be taken to be the aggregate of---
(a) all advances by the authorized institution to; and
(b) in relation to financial exposure to a company, the value of the authorized institution's holdings of shares and debentures (within the meaning of those terms in section 2 of the Companies Ordinance) issued by,
that person, company or combination:
Provided that this section shall not apply to--
(a) transactions between authorized institutions, or between the branches of
authorized institutions;
(b) transactions to the extent to which they are covered by a form of guarantee
acceptable to the Commissioner;
(c) an authorized institution the liabilities of which are assured by a letter of comfort accepted by the Commissioner under subsection (3) or (4), so long as the institution conforms with any limitation on the aggregate amount of any investments and advances which the institution may make, being a limitation imposed by the Commissioner under subsection (5)(a) or (7) or by the terms of a letter of comfort;
(d) the purchase of bills of exchange or documents of title to goods where the holder of such bills or documents is entitled to payment outside Hong Kong for goods exported from Hong Kong;
(e) any advances made against telegraphic transfers or against any bills or
documents referred to in paragraph (d);
(ƒ) any advances made to the Government;
(g) any advances maturing or callable within one year, made to any eligible
government as defined in paragraph 1 of the Third Schedule; or
(h) transactions between an authorized institution and a bank incorporated outside Hong Kong which is not licensed under this Ordinance where any such bank is, in the opinion of the Commissioner, adequately supervised by a banking supervisory authority in its place of incorporation. (3) The Commissioner may, for the purposes of paragraph (c) of the proviso to subsection (2), where the authorized institution is a bank, accept a letter of comfort if that letter of comfort--
(a)
is given by another bank which---
(i) is a shareholder in the bank for the benefit of which the letter of comfort is given;
(ii) controls any body corporate which is a shareholder in the bank for the benefit of which the letter of comfort is given; or
(iii) is a bank controlled by a body corporate which is either a share- holder in the bank for the benefit of which the letter of comfort is given or controls any body corporate which is a shareholder in that bank; or
(b) is given by another bank incorporated in Hong Kong, or by a bank in- corporated outside Hong Kong which is not licensed under this Ordinance but is, in the opinion of the Commissioner, adequately supervised by a banking supervisory authority in its place of incorporation; and
(c) has been given pursuant to a resolution of the board of directors of the other bank and with the knowledge of the banking supervisory authority of the place where the other bank is incorporated.
(4) The Commissioner may, for the purposes of paragraph (c) of the proviso to subsection (2), where the authorized institution is a deposit-taking company, accept a letter of comfort if that letter of comfort-
(Cap. 32.)
Third Schedule.
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