Asian Finance Instition

Only available on StudyMode
  • Download(s) : 93
  • Published : December 10, 2012
Open Document
Text Preview
Authorized Institution – Restriction by Type

| |Banks (LB 133) |Restricted Licensed |Deposit-taking | | | |Banks (RLB 46) |Company (DTC 45) | |Min. Deposit Amount (or equiv |No Restriction |HKD $500,000 |HKD $100,000 | |foreign currency) | | | | |2) Min. Deposit Maturity |No Restriction |24-hour call |3 months | |3) Min. share of capital of |HKD $300M |HKD $100M |HKD $25M | |AIs incorporated in HK | | | | |4) Min. Deposit of AI |N/A |N/A |N/A | |5) Min. shares of AI (public deposit) |HKD $3B |N/A |N/A | |6) Min. assets of AI |HKD $4B |N/A |N/A | |7) Basel Capital Adequacy Ratio |12% |16% |16% | |(CAR) > 4/1993 allow rise from 8% | | | | |8) Registration Fee |47,340 |384,270 |384,270 |

Abolishment of Interest Rate Restriction
Gradually weakened from 1994
Abolished in 2001
Deposit Insurance
Supplied to all banks, to insure depositors from any bank failure Moral Hazard
Deposit insurance encourages riskier loan
Hasn’t happened in HK due to liquidity in the banking sector which gives sufficient deposit to small banks

- Big banks wanted to keep IRR because they enjoy economies of scale and provide convenience, interest rate need not to be high to attract clients - Small banks wanted to remove IRR because there are too many competitors and they want to attract clients by ↑I/R

|Arguments FOR the restriction |Arguments AGAINST the restriction | |Higher interest rate ( higher risk of loan ( should set restriction on|Laissez faire economy: the restriction imposes an unnecessary constraint on the| |the interest rate to protect the risk of banks |economy | |Small banks would start offering higher interest rate and make riskier| | |loans, it will affect quality of loan and adversely affect HK’s | | |reputation | |

Licensed Banks
Facts
- 24 in Hong Kong
- 3 dominating: BOC (17%), HSBC, Hang Seng → 2/3 of assets - HSBC holds 51% of Hang Seng Bank → HSBC + HS = 50% of market share - BOC: 12 sisters merged in 2002
- BOC: 2 sisters remain independent: Chiyu Bank +...
tracking img