TNAG-2125-FCO40-3032-Banking-situation-in-Hong-Kong-1990 — Page 40

1990-05-17 15:32 BANK OF ENGLAND INT DIVN

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7.04

3. Supervisory issues

Structure of authorisations

3.1

Since 1981, Hong Kong has maintained three tiers of deposit-taking authorisation: licensed banks; licensed deposit- taking companies; and registered deposit-taking companies. Changes to part of this structure were set in hand during the year, and were completed early in 1990,

A

Three tier structure

เ

3.2

The Governor in Council approved in March the preparation of legislation to alter the categories of licensed deposit- taking company (ldtc) and registered deposit-taking company (rdic). The legislation was introduced to the Legislative Council in July, and enacted in January 1990, substantially as first agreed by the Governor in Council. The changes came into effect on 1 February 1990.

3.3

The changes were designed

(i)

(ii)

(U)

to improve the status of Idies, by giving them limited freedom to describe themselves as banks: it had become clear that the designation deposit-taking company' was not fully under- stood, either in Hong Kong, or overseas;

to permit sound overseas banks (and similar Enancial companies) to branch into Hong Kong, as an alternative to establishing a Hong Kong subsidiary, even though they were not large enough under the approved criteria to qualify for a full licence; and

to increase the minimum capital required for authorisation, to take account of the fall in the value of money and to bring it more into line with the standing and substance required for institutions authorised to accept deposits.

Restricted licence banks

3.4

The principal feature of the legislation changed the designation of Idtc into 'restricted licence bank' (rib), and permitted such institutions to describe themselves as banks. But this freedom is subject to a proviso: the word bank or its derivatives must be qualified by adjectives such as 'merchant', or 'Investment', in order that such institutions are clearly differentiated from licensed banks. Further adjectives will be permitted, the Commissioner having the power to specify them in the Gazette - but terms such as 'commercial' and 'retail' will not be acceptable.