Banking Ordinance

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Banking Ordinance are a set of laws passed by the Legislative Council of Hong Kong to tighten restrictions for opening up or licensing a bank. Prior to the 1964 re-regulations, the government had no way to control bank's monetary effect on the economy. It also had no way of protecting the people utilizing the institutions. Banking was considered a Laissez-faire network, and was also described as "Free Banking" or "Wildcat Banking" filled with much uncertainty.


Contents

[edit] History

[edit] Banking Ordinance of 1948

The first law passed. It provided for the licensing of banks, examination of bank books, publication of bank statements and the appointment of an advisory committee[1]. A Hong Kong dollar $5,000 license fee was required one-time. Afterwards, a bank could theoretically open on zero capital[2].

[edit] Banking Ordinance of 1964

The law was passed on October 16, 1964 and advised by a group of senior officials from the Bank of England. A minimum capital of HKD $5 million and liquidity ratio of 25% and limitation on loans and investments became the new requirements to open a legit institution[3].

[edit] Banking Ordinance of 1967

The law was passed in response to a banking crisis in which a few banks experienced liquidity problems and 18 acquisitions by larger banks were recorded. The revised law set the new minimum capital to HKD $10 million. A debt moratorium was imposed on new bank licenses[4].

[edit] Hong Kong Association of Banks

The Hong Kong Association of Banks was established in 1981 as a network tag for banks that follow the ordinance rules.

[edit] Banking Ordinance of 1986

The law is an enhancement to the existing 1967 set. Changes were made to the provisioning of banks, adequacy of capital, control of the management of a bank. It also merged the "Deposit-taking Companies Ordinance" which also required a certain capital before banks can accept deposits[5].

[edit] See also

Exchange Bank Association

[edit] References

  1. ^ Jao YC. [2001] (2001). The Asian Financial Crisis and the Ordeal of Hong Kong. Quorum, Greenwood. ISBN 1567204473
  2. ^ Cato org. "Cato Org." Is Free banking more Prone to Bank Failures. Retrieved on 2007-02-23.
  3. ^ Jao YC. [2001] (2001). The Asian Financial Crisis and the Ordeal of Hong Kong. Quorum, Greenwood. ISBN 1567204473
  4. ^ Masuyama, Seiichi. Vandenbrink, Donna. Yue Chia, Siow. [1999] (1999). East Asia's Financial Systems: Evolution & Crisis. Institute of Southeast Asian Studies Publishing. ISBN 9812300058
  5. ^ Roebuck, Derek. [1994] (1994}. Law Relating to Banking in Hong Kong. Hong Kong University Press. ISBN 9622093531
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