ENG-1993 — Page 89

FINANCIAL AND MONETARY AFFAIRS

of at least $150 million and a minimum trading period of 10 years as an authorised institution, an applicant has to also satisfy minimum requirements on assets (net of contra items) and public deposits. The latter two requirements were increased to $4,000 million and $3,000 million, respectively. In the case of a bank incorporated outside Hong Kong applying to establish a branch in the territory, the asset size requirement (net of contra items) was increased to US$16,000 million. A licence may still be granted in exceptional circumstances, however, if the bank is of exceptionally high standing or if banks from its country of incorporation are under-represented in Hong Kong. The criterion dealing with home country supervision has also been changed to the effect that the home supervisor must demonstrate the necessary capabilities for meeting the minimum standards for supervision of international banks published by the Basle Committee of Supervisors in June 1992. In general, there should be some acceptable form of reciprocity in an overseas applicant's home country to banks from Hong Kong.

At the end of 1993, there were 172 licensed banks in Hong Kong, 32 of which were locally incorporated. They maintained a total of 1 605 offices. In addition, there were 142 representative offices of foreign banks. The total deposit liabilities of all the licensed banks to customers at the end of the year was $1,676 billion. (For details, see Appendix 12.)

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 of up to 15 months less a day, with the exception of deposits of $500,000 or above, for which banks may compete freely.

Restricted banking licences are granted at the discretion of the Financial Secretary. Companies are required to have a minimum issued and paid-up capital of $100 million and to meet certain criteria regarding ownership, general standing and quality of manage- ment. If incorporated overseas, the applicants must also be subject to adequate home supervision. Restricted licence banks may take deposits of any maturity from the public, but in amounts of not less than $500,000. There are no restrictions on the interest rates they may offer. At the end of 1993, there were 57 restricted licence banks and their total deposit liabilities to customers was $29 billion.

Restricted licence banks may use the word 'bank' in describing their business in promotional literature and advertisements, but this must be qualified by adjectives such as 'restricted licence', 'merchant', 'investment' or 'wholesale'. To avoid confusion with licensed banks, descriptions such as 'retail' or 'commercial' are not allowed. Overseas banks seeking authorisation as restricted licence banks may operate in branch or subsidiary form. If in branch form, they may use their registered name even if it includes the word 'bank' or a derivative, but in this case it must be qualified prominently by the words 'restricted licence bank' in immediate conjunction.

The authority to register deposit-taking companies rests with the Hong Kong Monetary Authority. In addition to certain basic criteria, registration will be granted only to companies which are more than 50 per cent owned by a bank. Deposit-taking companies are required to have a minimum paid-up capital of $25 million. They are restricted to taking deposits of not less than $100,000, with a term to maturity of at least three months. At the end of 1993, there were 142 deposit-taking companies, and their total deposit liability to customers was $17 billion.

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