TNAG-2125-FCO40-3032-Banking-situation-in-Hong-Kong-1990 — Page 4

The 1981 criteria included the requirement that a local applicant for a banking licence should not be a subsidiary of а licensed bank. The reasons behind the adoption of this criterion cannot be traced but we assume that it Was an attempt to prevent banking groups

from acquiring licences Surplus to their own

own needs

needs in order to resell to third parties. It may also have been felt that one banking licence per banking group was adequate.

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Since 1981, there have been two developments which together invalidate the need to retain this requirement. Firstly, the 1986 Banking Ordinance requires changes of ownership to be approved by the Commissioner of Banking. The Commissioner would not be prepared to consent to a change of control where only a 'shell" company was to be transferred, as this would be an abuse of the privilege conferred by the licence granted by

by the Council Secondly, the narare banking has broadened. It is not unusual in other financial centres to find that a banking group contains more than one authorised bank, covering differen

ent activities.

The Creation of a Precedent

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Since 1981, only one local licence has been granted (in 1982 to Sun Hung Kai Bank, now International Bank of Asia. Should the two applicants be granted a licence, we do not envisage that this precedent will

will create any practical concerns. The case of JF & Co. is sui generis, as there is no banking licence in the group. In the case of Wardley, no other local bank subsidiary has developed to the extent that Wardley has. In terms of size criteria, there are only two other subsidiaries in the HS3C

in

HS3C group which have deposits above the qualifying level of HK$1,750 million, but both are concerned with the domestic provision of consumer credit and have no intention, or operational need, to seek bank status. No China-owned subsidiary meets the size criteria at present.

Authority of the Council to Waive Criteria

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Within its statutory discretions, the Council has the authority to alter, or dispense with, its stated policy in this case, the administrative criteria relating to bank licensing. If the recommendations in paragraph 3(b) and (c) are adopted, the issue of waiving the licensing criteria would not arise, but it would be desirable for any changes to the criteria to be publicised.