time deposits in banks and deposit-taking companies from March. Though the rate of withholding tax on interest on Hong Kong dollar deposits was reduced from 15% to 10% at the same
time, there has been no significant increase in Hong Kong dollar time deposits. But it is too early to be able to
assess the full
the full impact of these changes on the balance sheets of banks and of deposit-taking companies.
3.4
or
The second change was that with effect from 1st
March the Hong Kong Association of Banks amended its interest
(3) rate rules
So that banks are now able to compete freely
in terms of the interest rates they offer for deposits of
HK$500,000
more, with an original term to maturity or
period of call or notice of less than 3 months. This change
has contributed to a continuing shift of deposits from
deposit-taking companies to banks. This shift was already underway because registered deposit-taking companies had begun
to run down the total of short-term deposits they held in
accordance with the transitional arrangements set up in 1981 for the introduction of the three-tier monetary sector (4)
•
/3.5 Finally
(3) These specify the maximum rate of interest which may be paid by any
licensed bank on any Hong Kong dollar deposit due in up to 12 months.
(4)
Amendments to the Banking and Deposit-taking Companies Ordinances to create the new status of licensed deposit-taking company came into operation on 1st July 1981. These provide that as from that date no registered deposit-taking company may take any deposit with an original term to maturity, or period of call or notice, of less than 3 months. However any deposit-taking company which was registered prior to that date has a transitional period of two years to run down the less-than-3-month deposits on its books, so that from 1st July 1982 these may not exceed 50% of their level on 1st July 1981, and from 1st July 1983 the registered deposit-taking company may not hold or take any less-than-3-month deposits.
13
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