CONFIDENTIAL
XCC(92)152
Other criteria
10
It is not considered necessary for the other criteria and conditions to be changed. However, it should be noted that, in the on-going negotiations on the General Agreement on Trade in Services (GATS), some countries have expressed concern about the one-branch condition.
11
Hong Kong has maintained the stance that the condition is intended to avoid over-crowding in retail banking, rather than to prevent foreign competition. Given the size of our population and the extensive branch networks of existing retail banks (1 400 branch offices), it is generally recognised that the scope for further expanding retail banking is limited. Further entrants to the retail banking market would dilute the deposit base of institutions and might affect the viability of some smaller institutions, which in turn could undermine the stability of the banking system as a whole. Foreign banks intending to broaden their deposit base have the option of acquiring existing local banks or of setting up local restricted licence banks (RLB) or deposit-taking companies (DTC) which are not subject to the one-branch condition.
12
It is recommended that there be no change to this condition. Many Southeast Asian countries (including Singapore) and some OECD countries (including the U.S.) also have restrictions limiting foreign banks' ability to establish branches in their jurisdictions. However, depending on the progress of GATS negotiations, we might have to consider extending this condition to new local applicants at a later date.
Locally incorporated applicants
Size criteria
13
The current size requirements for local applicants are HK$2.5 billion in total assets and HK$1.75 billion in public deposits. These have remained unchanged since 1981. We recommend that the two thresholds now be doubled -
(a)
to take account of inflation (increasing the size criterion only for foreign bank applicants might invite criticism of discrimination against foreign applicants); and
Executive Council
No comments yet.
Private notes are available after approval.