ENG-1989 — Page 89

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FINANCIAL AND MONETARY AFFAIRS

HONG KONG's financial sector comprises an integrated network of institutions and markets which, under various forms of regulation, provide a wide range of products and services to local and international customers and investors.

Financial Institutions

Since 1981, deposit-taking institutions in Hong Kong have been classified into three separate groups: licensed banks, licensed deposit-taking companies and registered deposit- taking companies.

Banking licences are granted at the discretion of the Governor in Council, in accordance with the provisions of the Banking Ordinance. At present, in order to be considered for a banking licence, a local company (that is, a company incorporated in Hong Kong and predominantly beneficially owned by Hong Kong interests) must have a paid-up capital of at least $100 million, must have been in the business of taking deposits from and granting credit to the public for at least 10 years, and have at least $1,750 million of deposits from the public and at least $2,500 million of assets. A bank incorporated outside Hong Kong wishing to apply for a banking licence is required to satisfy a separate set of criteria: it must have total assets (net of contra items) of at least US$14,000 million (unless it is of exceptionally high standing and unless banks from its country of incorporation are under- represented in Hong Kong), and its country of incorporation must exercise an adequate form of prudential supervision on banks and offer some acceptable form of reciprocity to banks from Hong Kong.

At the end of 1989, there were 165 licensed banks in Hong Kong, 31 of which were locally incorporated. They maintained a total of 1 542 offices in Hong Kong. In addition, there were 158 representative offices of foreign banks. The total deposit liabilities of all the licensed banks to customers at the end of the year was $938 billion.

Only licensed banks may operate current or savings accounts. They may also accept deposits of any size and any maturity from the public. The interest rate rules of the Hong Kong Association of Banks (of which all licensed banks are required, under their licensing conditions, to be members) result in the setting of maximum rates payable on bank deposits of original maturities up to 15 months less a day, with the exception of deposits of $500,000 or above with a term to maturity of less than three months, for which banks may compete freely.

Licensed deposit-taking company status is granted at the discretion of the Financial Secretary. Companies are required to have a minimum issued share capital of $100 million and paid-up capital of $75 million, and to meet certain criteria regarding size, ownership

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