LegCo Paper No. CB(1) 487/96-97(01)

Paper for the Bills Committee
Banking (Amendment) Bill 1996
Further Committee Stage Amendments

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Introduction

This paper explains the purpose of the proposed revisions to the Committee Stage Amendments (CSAs) to the Banking (Amendment) Bill 1996 (the Bill).

Latest draft of Committee Stage Amendments

2. Further CSAs to the Bill have been proposed to take into account the discussions with the Bills Committee and to further refine the Bill. A copy of the revised CSAs is at Annex.

3. The further revisions made to the CSAs are as follows :

(a) Clauses 3(b) and 24 - Maximum value for single-purpose cards

In considering our earlier paper on 24 September, Members agreed that single-purpose cards, irrespective of its stored value, should remain outside the scope of the Banking Ordinance. Accordingly, the new paragraph (b) under the definition of "single-purpose card" and the Fourteenth Schedule which specify the maximum value of a single-purpose card have been deleted.

(b) Clause 3(c), new Section 2(15) - deeming certain SVC value as deposits

In the case of cards where the value is originated and issued by the bank itself (as with the VisaCash scheme), the nature of the stored value issued is similar to deposits. In fact, the effect of issuing stored value is simply to cause a shift from one liability of the bank (e.g. demand deposits) to another (liability for stored value). We consider that such stored value should be given similar protection to deposits, and should thus receive priority payment in the case of the bank’s liquidation. For the avoidance of doubt, we have included a new deeming provision (new section 2(15) under clause 3(c)) added to the CSAs to put it beyond doubt that such stored value will be accorded priority payment in liquidation under section 265(1)(db) of the Companies Ordinance (Cap. 32).

The current provision is drafted in such a way that the stored value issued under the Mondex scheme will not be covered by the priority payment scheme. Such stored value is akin to banknotes, rather than deposits. All Mondex value is originated by one entity and is not recorded on the liability side of the balance sheet of the issuing bank. It is thus not covered by the proposed deeming provision. However, the HKMA will impose conditions on Mondex to ensure that the Mondex float is invested in high quality assets and is adequate for redemption of all outstanding Mondex value.

(c) Clause 20, new Section 134B(1)(a)

Section 134B(1)(a) is amended to reflect the decision not to require electronic brokers to take up membership of the money broker association. The main objective of the originally proposed requirement for electronic brokers to take up membership with the money broker association is to ensure that they will conduct their business in high standards by complying with the Association’s Code of Conduct. As this can be achieved alternatively by imposing a condition on all approved money brokers that they should adhere to a code of conduct guidelines specified by the MA, it is thus considered not necessary to require them to join the money brokers association.

(d) New Clause 13A - Section 97A(1)

It is noted that section 97(1) empowers the MA to give consent for a non-bank to use the word "bank" in the description or name under which it is carrying on business in Hong Kong. This seems to conflict with section 97A which prohibits any person from describing or holding out himself to be a bank (regardless of whether he has the approval of the MA under section 97). To remove this apparent inconsistency, section 97A(1) is amended by making section 97A subject to section 97(1).

(e) Chinese version of the bill

As the text of the Banking Ordinance in the Chinese language was declared to be the authentic text of the Ordinance as at 30 September 1996, the Chinese version of the Banking (Amendment) Bill 1996 (incorporating the proposed CSAs attached to this paper) will be set out in a separate CSA.

Hong Kong Monetary Authority
December 1996

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