第一章: The Hong Kong banking¹ system – an introduction

　　1）The main features of the three-tier system

The essential feature of the change in the system is that the old categories of the Licensed³ Deposit –Taking Companies (LTDS) and the Registered Deposit-taking Companies (RTDS) were replaced by two new categories, the restricted licensed banks (RLBs) replace the LTDS and the deposit taking companies (DTCS) replace the RDCs.

　　There is no change in respect of Licensed Banks except that the minimum paid-up share capital for locally incorporated banks is increased from HK$100 million to HK$150 million.

　　The minimum paid-up shares capital requirement is now HK$25 million instead of HK $10 million as before.

　　2）The implications of the system

Sound overseas banks, even though they do not meet the approval criteria⁴ for a full license², are now allowed to branch into HK as RLBs, as an alternative to setting up a subsidiary here.

　　1. Direct entry to the tier of RLB is allowed.

　　2. The status of RLB is superior to that of the LDTC where a RLB is incorporated overseas.

　　3. Overseas banks are newly –authorized⁵ RLBs in branch form are allowed to operate only from offices in one building

　　4. Local banks traditionally operate in the retail⁶ market whereas overseas banks authorized as RLBs are mainly carrying on merchant banking business.

　　3）HK monetary⁷ authority:

1. Established in 1 April 1993

　　2. Merging⁸ the office of the Exchanged Fund with the Office of the Commissioner⁹ of Banking.

　　3. Purpose: to maintain the continuity and professionalism in HK’s monetary and reserves management and banking supervision¹⁰, in a way which commands the confidence of the people of HK and the international financial community

Responsibility

1. Execution and development of monetary policy

2. Maintenance of exchange rate and monetary stability

　　3. Development of the debt market in HK

　　4. Promoting the efficiency, integrity and development of payment and settlement arrangements

　　5. Managing the assets of the Exchange Fund

　　6. Prudential supervision of authorized institutions under the Banking Ordinance¹¹

　　7. Formulating¹² polices relating to banking supervision

　　8. HKMA is an integral part of the government but is able to employ staff on different terms to those of the civil service to attract personnel of the right caliber¹³, experience and expertise¹⁴.

　　9. HKMA is accountable to Financial Secretary, who is advised by the Exchange Fund Advisory¹⁵ Committee on matters relating to the control of the Exchanged Fund and on the annual budget of the HKMA.

　　Business scope

1. Deposits

2. Loans

3. Settlement

4. Guarantees

　　5. Interbank borrowing and lending

　　6. Trade in Chinese treasury¹⁶ bond

　　1. Definition of a “banking “in Hong Kong

　　A bank is a financial intermediary, which provides special types of services relating directly or indirectly¹⁷ to finance. In Hong Kong, the Banking Ordinance defines a “bank” as a company, which carries on “banking business”, and holds a valid¹⁸ bank license granted by the HKMA together with the SAR Chief Executive.

　　2. Banking business

Banking business is

(1) Receiving from the general public money on current deposit, savings¹⁹ deposit or other similar account repayable on demand or within less than three months or at call or notice less than three month;

　　(2) Paying or collecting cheques drawn²⁰ by or paid in by customers.

　　(3) Providing credit cards or charge cards to customers, give business advice, handle clients’ auto-pay system, transfer money, and provide foreign exchange and other services.

　　1.current deposit活期存款, current accounts do not usually produce any interest for the customers.

　　2.Only banks with valid licenses are allowed to offer cheque deposit account (current accounts)