ENG-1978 — Page 64

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FINANCIAL STRUCTURE

minimum requirements on capital and liquidity. Only licensed banks and represen- tative offices of foreign banks may use the word 'bank'.

In 1965, a moratorium on the issue of new banking licences was imposed. Only one new licence was issued before the Financial Secretary announced on March 15, 1978, that consideration would be given to applications for banking licences from well-established foreign banks meeting a number of criteria relating to size and back- ground. Since the announcement, 27 new banking licences have been issued and by the end of 1978, there were 101 licensed banks in Hong Kong. At the end of 1978, there was a total of 878 banking offices and 106 representative offices of foreign banks.

Foreign bank-owned finance companies and other non-bank financial institutions which take deposits from the public are required to register under the Deposit-taking Companies Ordinance, which came into effect in April, 1976. At the end of 1978, 241 such companies were registered.

The money supply, broadly defined to include all bank deposits and notes and coins held outside the banking system, increased during 1978 by 26 per cent to $73,406 million at December 31. The major factor was a substantial increase in domestic loans and advances which rose by 43 per cent to reach $52,814 million. Banking statistics for the past three years are shown in Appendix 12.

Securities

Discussions between Hong Kong's four stock exchanges on proposals to merge into one exchange led in May, 1977, to the setting up of a Working Party on Unification with the stated aim of agreeing to a timetable to bring about the unification of the stock exchanges. During 1977 and 1978 the working party had 11 meetings and negotiations are continuing.

Staff of the Office of the Commissioner for Securities continued to scrutinise finan- cial transactions involving securities and to monitor unusual movements in share prices. More than 30 enquiries were instituted during the year resulting, in some cases, to changes in company plans and fuller disclosure of information to the investing public.

It is one of the functions of the Office of the Commissioner for Securities to investi- gate possible instances of insider dealings in securities to establish whether there is a prima facie case to be examined by the Insider Dealing Tribunal. The tribunal was not convened in 1978.

A revised edition of the Hong Kong Code on Takeovers and Mergers was published in May, 1978. Based on the original 1975 version, the revised code incorporates im- provements and amendments aimed at eliminating areas of ambiguity. During the year there were eight instances where control of a company changed hands. These included three outright takeovers, a rationalisation of four interlinked companies into one, and two changes of control where it was intended to retain the stock exchange listing. In addition, there were eight occasions when minority shareholders were bought out.

The Hong Kong Code on Unit Trusts and Mutual Funds came into force in June, 1978. The code is administered by the Committee on Unit Trusts, which is chaired by the Commissioner for Securities and includes representatives of the unit trust industry.