TNAG-1769-FCO40-2523-Hong-Kong-mergers-involving-banks-and-other-financial-instit-1988 — Page 128

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MAY.20 '88 18:49 LINKLATERS & PAINES HK 5-8108133

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LINKLATERS & PAINES

We considered with RIB the simplest way in which the transaction could be structured. However, in view of the fact that RIB is an Edge Act corporation incorporated in the United States and has separate activities in Los Angeles (which Daiwa were unwilling to acquire and RIB did not wish to sell), it was not practicable for RIB itself to be sold by its parent, Rainier National Bank. Consideration was given to the possibility that the Hong Kong Branches could be incorporated into a separate newly formed company prior to the sale, but this would have involved RIB seeking the issue of a further banking licence for that company from the Governor-in-Council and cancellation of RIB's existing licence. addition, the vesting of the Hong Kong Branches into the new company would have been no less difficult to achieve than their sale to Duiwa.

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We concluded, after discussions with RIB's advisers in the United States and with Dalwa's Hong Kong advisers (Johnson, Stokes & Master), that the complexities of the sale of the llong Kong Branches were such that it would be very difficult to complete the transaction without seeking private enabling legislation substantially similar to that which has been sought in Hong Kong by a number of banking entities in recent years to effect restructurings. (The most recent such legislation of which we are aware involved Deutsche Bank, earlier this year and before that, Lloyds Bank and Royal Bank of Scotland in 1985). The principal problem that arises from a sale without the aid of such legislation is that credit balencas held by RIB, being Liabilities, cannot as a matter of Hong Kong lạy so far as third parties (i.. customers) are concerned he assumed by a purchaser, however substantial, without the consent of each such customer. We are advised that the Hong Kong Branches have over 30,000 account holders, and of course, loans, security arrangements and numerous other relationships.

One of the conditions of the Agreement is therefore the enacting by the Governor-in-Council with the advice and consent of the Legislative Council of a private bill having the effect of transferring the Hong Kong undertaking of RIB to Daiwa.

We have drafted and enclose for your consideration a private bill for the transfer of the Hong Kong Branches. We understand that you will already have been advised by the Monetary Affairs Branch of Hong Kong that we will be submitting this draft to you and of their position with respect. to the Bi11.

We also enclose, in case this should prove to be of assistance, copy of the draft Bill marked up to show the differences between the draft Bill and the Deutsche Bank (Marger) Ordinance 1988.

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We also enclose a copy of the timetable with respect to the draft Bill, which has been discussed with the Bill's sponsor and the Clerk of Councils of Hong Kong. We appreciate that this is extremely tight, but our ability to extend is constrained by the fact that the final session of the Legislative Council is on 20th July, 1988. We should therefore be grateful for your carly consideration of the enclosed draft Bill.

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