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Following is a question by the Hon Sin Chung-kai and a written reply by the Secretary for Financial Services, Mr Stephen Ip, in the Legislative Council today (March 7):

Question:

The Hong Kong Association of Banks Ordinance (Cap. 364) empowers the Hong Kong Association of Banks ("HKAB") to make rules pertaining to the conduct of banking business for banks to abide by. Since the deregulation of the remaining rules of the Rules on Interest Rates and Deposit Charges has been scheduled for July this year, will the Government inform this Council whether it plans to introduce amendments to the Ordinance to repeal the following powers of HKAB:

(a) to set the maximum interest rates on Hong Kong dollar deposits; and

(b) to make rules pertaining to the minimum commissions and charges to be applied to other banking business;

if so, of the details; if not, the reasons for that?

Reply:

Madam President,

(a) Assuming that the remaining interest rate rules covering savings and current accounts under the "Rule on Interest Rates and Deposit Charges" will be removed in July 2001, the Committee of the Hong Kong Association of Banks (HKAB) will, after consultation with the Financial Secretary, abolish the "Rules on Interest Rates and Deposit Charges". The Government also intends to conduct a review of the role of HKAB in the light of latest developments in the banking industry. The review will include an examination of the rule-making power of HKAB and whether there is any need to amend the HKAB Ordinance.

(b) Apart from the power to specify interest rate ceilings on deposit rates, the HKAB Ordinance also empowers HKAB to make rules on the minimum commissions and charges to be applied by banks in respect of other banking businesses such as foreign exchange, securities and safe custody business and the issuance of guarantees or other documents. HKAB has ceased to prescribe minimum commissions and charges for such businesses since August 1995. The relevant rules have been turned into non-mandatory guidelines. Accordingly, banks are free to quote their own tariff for these services. This aspect of the rule-making power of the Committee of HKAB will also be covered in the general review of the role of HKAB as mentioned in part (a) above.

End/Wednesday March 7, 2001

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