CONFIDENTIAL
FM HONG KONG
TO IMMEDIATE FCO
TELNO 1524
OF 09120OZ MAY 90
CONFIDENTIAL
077206
MDHIAN 9853
Hkc 102/2
PERSONAL FOR PAUL HKD FROM GOVERNOR
باح
(20) 25
36
YOUR TELNOS 879, 910, 911 AND 912: JARDINE FLEMING BANKING LICENCE
BACKGROUND FACTS ON THE APPLICATION BY JARDINE FLEMING AND CO (JF AND CO) FOR A FULL BANKING LICENCE ARE AS BELOW. MIFT HAS SUGGESTIONS FOR A REPLY FROM THE PRIME MINISTER TO KESWICK'S LETTER.
2. 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 BANK LICENCE WHERE THESE POWERS ARE UNRESTRICTED.
3. UNTIL A RECENT CHANGE TO THIS QUOTE THREE-TIER QUOTE SYSTEM IN FEBRUARY THIS YEAR, ONLY THOSE WITH A FULL BANK LICENCE WERE ALLOWED TO DESCRIBE THEMSELVES AS BANKS. UNDER THE PREVIOUS SYSTEM THE MIDDLE CATEGORY OF INSTITUTIONS, OF WHICH JF AND CO IS ONE, WERE KNOWN AS LICENSED DEPOSIT-TAKING COMPANIES. FOLLOWING A CHANGE
IN THE LEGISLATION IN FEBRUARY THOSE IN THIS CATEGORY ARE NOW DESIGNATED RESTRICTED LICENCE BANKS. THEY ARE ABLE TO REFER TO THEMSELVES AS MERCHANT BANKS. THIS CHANGE WAS INTRODUCED PARTLY BECAUSE OF THE DIFFICULTIES WHICH LICENSED DEPOSIT-TAKERS, MOSTLY MERCHANT BANKS, HAD IN DESCRIBING THEIR BUSINESS. ALSO TO GIVE THEM ADDITIONAL STANDING. JF AND CO ARE THUS NOW ABLE TO CALL THEMSELVES A MERCHANT BANK WHICH WAS AN IMPORTANT POINT FOR THEM IN TERMS OF THE INTERNATIONAL STANDING AND IMAGE OF THE GROUP AS A WHOLE.
4"
BANKING LICENCES ARE GRANTED BY EXCO, WITH APPLICATIONS ROUTED VIA THE COMMISSIONER OF BANKING. EXCO HAS UNFETTERED DISCRETION AS TO WHETHER OR NOT TO GRANT A LICENCE. NO STATUTORY CRITERIA ARE LAID DOWN. BUT FOR MANY YEARS THE DETAILS HAVE BEEN PUBLICLY AVAILABLE OF THE BASIS ON WHICH EXCO IS LIKELY TO CONSIDER AN APPLICATION FAVOURABLY. THESE CRITERIA LAY DOWN THAT BANKS
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