TNAG-2125-FCO40-3032-Banking-situation-in-Hong-Kong-1990 — Page 13

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possibility that locally owned deposit taking companies could aspire

to become full banks.

Jardine Fleming would not satisfy the criteria for a non-Hong

Kong institution since it ranks well below the world's 300 largest

banks in terms of size. Nor does it satisfy the criterion that a

local applicant should be predominantly beneficially owned by Hong

Kong interests since neither of its ultimate parent companies is incoporated in Hong Kong. Jardine Fleming and Co was incorporated in Hong Kong in 1970 as a joint merchant banking venture between

Robert Fleming and Jardine Matheson (now legally incoporated in Bermuda, although its headquarters and principal operations are in Hong Kong).// when "Exco considered Jardine Fleming's application for a banking licence in February 1989, they concluded that unless the

licencing criteria were changed, granting a full banking licence to

Jardine Fleming under the criteria for a local institution would be

impossible to justify pubicly, particularly in view of the publicity

given to Jardine Matheson's decision to leave Hong Kong in 1984 to

be re-incoroporated in Bermuda. Consequently ExCo decided that

Jardine Fleming's application should not be determined until a

thorough review of the licencing criteria had been completed. review was completed in January this year.

That

When ExCo re-considered this question in the light of the

review, they decided the time was not ripe to make any changes to

the criteria until it could be seen how the new "three-tier" system

of authorisation worked out in practice. For some years there have

been three categories of authorisation granted for institutions to

carry on a deposit taking business in Hong Kong. Each category confers different powers to take deposits, culminating in a full

banking licence where these powers are unrestricted. Until a recent change to this "three-tier" system in February this year, only those

with a full banking licence were allowed to describe themselves as

banks. Under the previous system, the middle category of institutions, of which Jardine Fleming is one, were known as licenced deposit-taking companies. Following an amendment to the

Banking Ordinance in February, however, institutions in this category are now designated restricted licence banks and are able to

refer to themselves as merchant banks. The main reason for this