TNAG-2464-FCO40-3588-UK-business-interests-in-Hong-Kong-Jardine-Matheson-Holdings-1992 — Page 32

Annex F

Review of the New Authorization Category of

Restricted Licence Bank

I. Background

1.

The authorization category of restricted licence bank (rlb), introduced in February 1990, was designed

2. the dtcs

(a)

(b)

to improve the status of licensed deposit-taking companies (dtc), by giving them limited freedom to describe themselves as banks; and

to

permit sound overseas banks 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.

The new category following difficulties

aims to overcome in particular previously faced by licensed

(a) the inability to describe themselves as "banks" inhibited their business, especially abroad. For institutions owned by foreign bank, they were unable to use their parents' banking names, even though their parents are reputable international banks. For local institutions wanting to expand overseas, the difficulty is that outside Hong Kong the term 'dtc' is either not understood or pejorative;

(b)

(c)

unlike "bank", the classification "dtc" covers too diverse a range of institutions for the term to carry any descriptive meaning. Some institutions have experienced difficulty in getting acceptance by institutions overseas of their status as

supervised institutions.

creditworthy,

For

example, there is often reluctance to accept a guarantee issued by a dtc, even where it is a subsidiary of one of the world's largest banks;

and

where overseas banks operate here through dtcs, the inability of such dtcs to use their parents' banking name in effect confined their presence in subsidiaries (i.e. locally incorporated with separate capital), rather than This constrains their development as unable to trade

on their parents'

the

form

branches. they are capital.

of