ENG-1977 — Page 64

FINANCIAL STRUCTURE

Banking

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The Banking Ordinance provides for the supervision and inspection of banks by the Commissioner of Banking, and obliges banks to meet certain minimum requirements on capital and liquidity. At the end of 1977, there were 74 licensed banks with 803 banking offices.

Bank deposits increased during 1977 by 20 per cent to $53,019 million at December 31. Loans and advances increased by 30 per cent to reach $55,649 million. Banking statistics for the past three years are shown in Appendix 12.

At the end of 1977, there also were 100 representative offices of foreign banks which, where necessary, were permitted to use the word 'bank'. In addition, 201 companies were registered under the Deposit-taking Companies Ordinance, which allows them to take deposits from the public under certain restricted conditions. These companies include branches and subsidiaries of foreign banks, as well as other non-bank financial institutions engaged in various types of business.

Securities

Considerable progress was made during the year towards the formation of one stock exchange in Hong Kong in place of the existing four exchanges. In May, 1977, a Working Party on Unification was formed at the request of the four stock exchanges. The Commissioner for Securities, at the invitation of the exchanges, chaired the working party, which has met regularly. At the first meeting in May, representatives of the four exchanges accepted that the aim of the working party was 'to agree on a schedule of steps (on an agreed timetable) to bring about the unification of the stock exchanges into one approved exchange'. In the last part of the year, there were talks between the Far East Exchange Ltd. and the Kowloon Stock Exchange Ltd. on a possible merger. The plan is still under discussion.

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The commissioner's staff continued to scrutinise financial transactions involving securities and to monitor unusual movements in share prices, instituting further in- quiries where appropriate.

The introduction of the Securities (Amendment) Ordinance 1977 saw, among other things, the establishment of the Insider Dealing Tribunal.

It is now the function of the Office of the Commissioner for Securities to investigate matters that may involve insider dealings in securities to establish whether there is a prima facie case to be examined by the tribunal on reference from the Financial Secretary through the Securities Commission.

During 1977, there were 14 takeovers or mergers of companies listed on the stock exchanges, of which eight were achieved by schemes of arrangement. The Hong Kong Code on Takeovers and Mergers, which was drafted in 1975 and which does not have the force of law but has the support of those professionally involved in the securities industry, was subject to two amendments in June, 1976, and in September, 1977. It is now being reviewed and it is intended to publish a completely revised version.

The Office of the Commissioner for Securities has under preparation a Hong Kong Code on Unit Trusts and Mutual Funds. The drafting of this code, a task in which the unit trust industry gave invaluable assistance, had almost been completed by the end of 1977. Compliance with the code will be a necessary condition of granting authori- sation to a unit trust or mutual fund: it will be administered by a Committee on Unit Trusts, under the chairmanship of the Commissioner for Securities.