TNAG-1946-FCO40-2772-Taiwanese-banks-in-Hong-Kong-1989 — Page 6

CONFIDENTIAL

FM HONG KONG

TO PRIORITY FCO

TELNO 333

OF 30110OZ JANUARY 89

INFO PRIORITY PEKING

CONFIDENTIAL

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037231 MOLIAN 2573

HKC 102/1 Акс

TOP COPY O 'ནྟི ,

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TAIWANESE BANKS IN HONG KONG

1. THE TAIWANESE MINISTRY OF FINANCE HAVE ENQUIRED THROUGH AN INTERMEDIARY (DAVID LI, BANK OF EAST ASIA AND LEGCO MEMBER) WHETHER AN APPLICATION FOR A HONG KONG BANKING LICENCE BY THE FIRST COMMERCIAL BANK OF TAIWAN WOULD BE CONSIDERED FAVOURABLY. UNDER OUR BANKING ORDINANCE, THE GRANTING OF BANKING LICENCES IS AT THE SOLE DISCRETION OF GOVERNOR IN COUNCIL, WITHIN THE CONTEXT OF PUBLISHED GUIDELINES WHICH INTER ALIA RELATE TO THE SIZE OF THE BANK AND THE ADEQUACY OF SUPERVISION EXERCISED BY ITS HOME AUTHORITIES. THE FIRST COMMERCIAL IS 75 PER CENT OWNED BY THE TAIWANESE GOVERNMENT. THE ENQUIRY AROSE IN CONNECTION WITH ONE BY DAVID LI'S BANK

OPENING A BRANCH IN TAIPEI.

2. FIRST COMMERCIAL IS THE THIRD LARGEST BANK IN TAIWAN. IT WOULD

QUALIFY FOR A BANKING LICENCE HERE ON SIZE GROUNDS. IF APPROVED IT WOULD BE THE FIRST TAIWANESE BANK TO ESTABLISH A BRANCH IN HONG

KONG. I UNDERSTAND THAT IT HAS ALREADY ESTABLISHED OVERSEAS BRANCHES INCLUDING ONE IN LONDON, WHERE IT IS AUTHORISED BY THE BNK OF ENGLAND UNDER THE BANKING ACT.

3. GIVEN OUR DEVELOPING TRADE AND ECONOMIC RELATIONSHIP, THE LICENSING OF TAIWANESE BANKS IS A PROBLEM WE WILL HAVE TO FACE AT

SOME TIME. ON THE FACE OF IT THE APPEARANCE OF TAIWANESE BANKS IN

HONG KONG WOULD HAVE SOME ADVANTAGES BOTH IN FINANCIAL MARKET TERMS

AND AS A DEMONSTRATION OF TAIWANESE BELIEF IN HONG KONG'S FUTURE

PROPERITY.

4. ON A RECENT VISIT TO PEKING THE COMMISSIONER OF BANKING HAD

UNOFFICIAL INDICATIONS FROM THE BANK OF CHINA AND CITIC THAT THE

CHINESE WOULD CONSIDER IT A GOOD IDEA TO HAVE TAIWANESE BANKS IN HONG KONG. FROM THIS HINT, AND GIVEN THE CURRENT STATE OF PEKING/ TAIPEI RELATIONS, IT SEEMS UNLIKELY THAT THE CHINESE WOULD OBJECT. MAJORITY OWNERSHIP BY THE TAIWAN GOVERNMENT MIGHT BE SEEN IN PEKING

AS A COMPLICATING FACTOR: BUT I UNDERSTAND THAT THE BANK IS A COMMERCIAL ONE WITH NO OFFICIAL STATUS. I ASSUME THIS POINT WAS

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PAGE CONFIDENTIAL