ENG-1974 — Page 60

FINANCIAL STRUCTURE

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to those countries not to diversify their reserves. Hong Kong participated in these arrangements until late in 1974. They allowed a gradual reduction of the proportion of sterling held within Hong Kong's official external reserves from 99 per cent in September 1968 to 70 per cent in April 1974, and the proportion was further reduced by the end of 1974. The guarantee provisions had to be implemented twice, and Hong Kong received compensation. Official reserves are now held in several other countries as well as Britain.

When sterling was allowed to float in June 1972, the sterling area was largely disbanded and Hong Kong ceased to be a member. From January 1973, all exchange control regulations in Hong Kong were rescinded. Furthermore, after September 1973, when the banks' sterling assets ceased to be covered by Britain's guarantee arrangement, banks became free to employ their external funds in any currency.

Banking

Bank deposits increased during 1974 to $30,998 million at December 31, which represents a net increase of 18 per cent over the previous year. Loans and advances increased during 1974 by 27 per cent to reach $29,549 million at December 31.

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At the end of 1974 there were 74 licensed banks in Hong Kong with a total of 631 banking offices, an increase of 88 during the year. In addition, there were 66 representative offices of foreign banks.

Banks in Hong Kong have branches and correspondents throughout the world and offer a comprehensive service. Monthly bank clearings averaged $29,390 million. Banking statistics for the past three years are shown in Appendix 11.

Stock Exchanges

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On February 13, 1974 two ordinances--the Securities Ordinance and the Pro- tection of Investors Ordinance-were enacted by the Legislative Council and were brought into operation on March 1.

Both ordinances were based on recommendations contained in the first report of the companies law revision committee. The first piece of legislation arising from the report had been the Companies (Amendment) Ordinance 1972 which established a better legal framework for the presentation of company prospectuses when shares are offered for sale to the public or are placed privately on a stock exchange.

The comparatively short Protection of Investors Ordinance aims at protecting investors against fraudulent or reckless misrepresentation by inducing them to enter into agreements, or to take part in arrangements, involving the investment of money in securities or other property. It also bans advertisements which invite the public to invest in any form of property, unless they have been authorised by the Securities Commission.

The Securities Ordinance provides for the regulation of dealing in securities, whether they take place on stock exchanges or elsewhere in Hong Kong, and the registration of dealers in securities, investment advisers, and their representatives.

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