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Following is the speech by the Secretary for Financial Services, Mr Rafael Hui, in the moving of second reading of the Banking (Amendment) Bill 1999 in the Legislative Council today (Wednesday):
Madam President,
I move that the Banking (Amendment) Bill 1999 be read a second time.
Purpose
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The purpose of the Government in introducing the Bill is to bring Hong Kong's banking supervisory regime fully in line with the Basle Committee's Core Principles for Effective Banking Supervision and to improve the operation of the Banking Ordinance in the light of market developments.
Core Principles for Effective Banking Supervision ("Core Principles")
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In September 1997, the Basle Committee published the Core Principles for Effective Banking Supervision which lay down the minimum requirements for effective banking supervision. The Core Principles serve as a reference for supervisory authorities around the world to review their existing supervisory arrangements and to initiate a programme designed to address any deficiencies as quickly as practicable within their legal authority.
The Hong Kong Monetary Authority (MA) has assessed the situation of Hong Kong based on the Core Principles. It is found that Hong Kong's banking supervision framework already substantially complies with the Core Principles, except in the following three areas: MA's examination of major acquisitions or investments made by authorized institutions (AIs), disclosure of information by the MA to the supervisory authorities of overseas registered banks to facilitate consolidated supervision, and MA's supervisory power to bring about corrective actions on banks.
Major Content of the Bill
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It is our policy that the supervisory framework in Hong Kong should conform as much as possible to international supervisory standards. Hence, we propose several amendments to the Banking Ordinance.
First of all, we propose to introduce a new provision whereby a locally incorporated AI is required to seek the MA's prior approval of any major acquisition or investment in a company which is 5% or more of the capital base of the AI.
In addition, we propose to replace section 121(3) of the Banking Ordinance with new provisions to enable the MA to attach a condition to any disclosure made under section 121 to require that any person to whom the information is disclosed or any person receiving the information must obtain the MA's consent for any onward transmission of such information. It will be stipulated that such a condition is mandatory in the case of disclosure of individual customers' information by the MA.
Thirdly, to prevent the supervisory authority in the course of taking corrective actions on an AI from being disrupted by a winding-up petition against the AI presented by its creditors, we propose that a provision be introduced to give the MA the right to be heard at the Court in respect of a winding-up petition against an AI and to give views on whether he supports or opposes such a petition.
Besides the above three amendments, we also propose that the relevant provisions be amended in order to improve the Banking Ordinance in the light of market developments. We propose to give the MA the power to require all AIs to publish or disclose information relating to their financial affairs as well as to specify the manner and timing in which this should be published or disclosed.
We also propose to amend the relevant provisions to allow the AIs which were incorporated outside Hong Kong to lodge either a copy of their audited annual accounts or, with the MA's approval in writing, a copy of the consolidated accounts of their holding company.
Madam President, with the above proposed amendments, not only will the supervision of Hong Kong's banking sector be improved and conform fully to internationally recognized standards, but the operation of AIs will also become smoother and better meet the needs of the market. This is essential for promoting the long-term development of Hong Kong's banking sector and enhancing Hong Kong's status as an international financial centre. I invite Members to support the Bill.
End/Wednesday, May 26, 1999
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