| 1 | 2 | 3 | 4 | 5 | 6 |
BANKING ORDINANCE

BANKING ORDINANCE (Amended 43 of 1990 s. 14) 145. Conditions attached to former licences, etc. deemed to be conditions under this Ordinance (1) Where, immediately before the commencement of this Ordinance, there was in force any condition attached to a former banking licence under section 7 (1) (b) or 7A of the former Banking Ordinance and, on and from that commencement, the former banking licence is deemed by virtue of section 143 to be a banking licence, then, on and from that commencement, any such condition shall be deemed to be a condition attached to the banking licence as if, on that commencement, the Governor in Council had attached such condition under section 17 to the banking licence, and the provisions of this Ordinance shall apply accordingly.

(2) Where, immediately before the commencement of this Ordinance, there was in force any condition attached to a former deposit-taking licence under section 16B (1) (a) or (3) of the former Deposit-taking Companies Ordinance and, on and from that commencement, the former deposit-taking licence is deemed by virtue of section 143 to be a deposit-taking licence, then, on and from that commencement, any such condition shall be deemed to be a condition attached to the deposit-taking licence as if, on that commencement, the Financial Secretary had attached such condition under section 25 (3) to the deposit-taking licence, and the provisions of this Ordinance shall apply accordingly.

(3) Where any local branch to which section 44 (3) applies had in force, immediately before the commencement of this Ordinance, an approval under section 12A (1) or (3) of the former Banking Ordinance or section 16H (1) or (3) of the former Deposit-taking Companies Ordinance to which was attached any condition under section 12A (4) of the former Banking Ordinance or section 16H (4) of the former Deposit-taking Companies Ordinance and which condition was in force immediately before that commencement, then, on and from that commencement, any such condition shall be deemed to be attached to the approval under section 44 of the local branch as if, on that commencement, the Commissioner had attached such condition under section 44 (4) to the approval, and the provisions of this Ordinance shall apply accordingly.

(4) Where any local representative office to which section 46 (2) applies had in force, immediately before the commencement of this Ordinance, an approval under section 12C (1) or (2) of the former Banking Ordinance to which was attached any condition under section 12C (4) of the former Banking Ordinance and which condition was in force immediately before that commencement, then, on and from that commencement, any such condition shall be deemed to be attached to the approval under section 46 of the local representative office as if, on that commencement, the Commissioner had attached such condition under section 46 (4) to the approval, and the provisions of this Ordinance shall apply accordingly.

(5) Where any overseas branch or overseas representative office to which section 49 (3) applies had in force, immediately before the commencement of this Ordinance, an approval under section 12F (1) or (3) of the former Banking Ordinance or section 16J (1) or (3) of the former Deposit-taking Companies Ordinance to which was attached any condition under section 12F (4) of the former Banking Ordinance or section 16J (4) of the former Deposit-taking Companies Ordinance and which condition was in force immediately before that commencement, then, on and from that commencement, any such condition shall be deemed to be attached to the approval under section 49 of the overseas branch or overseas representative office, as the case may be, as if, on that commencement, the Commissioner had attached such condition under section 49 (4) to the approval, and the provisions of this Ordinance shall apply accordingly.

146. Suspension of former registration, etc. deemed to be suspension under this Ordinance Where any former registration or former deposit-taking licence which is, on and from the commencement of this Ordinance, deemed by virtue of section 143 to be registration or a deposit-taking licence, was, immediately before that commencement, suspended under Part VII of the former Deposit-taking Companies Ordinance, then, on and from that commencement, that registration or that deposit-taking licence, as the case may be, shall, in the like manner, be deemed to be suspended under Part VI for the period concerned of such suspension left to serve immediately before that commencement as if, on that commencement and for that period, the designated authority under Part VI had suspended that registration or deposit-taking licence, as the case may be, and the provisions of this Ordinance shall apply accordingly.

147. Actions, etc. under Part IV of former Banking Ordinance deemed to be actions under Part X of this Ordinance Where an act, matter or thing has been done under Part IV of the former Banking Ordinance by the Commissioner, the Financial Secretary or the Governor in Council to or in relation to a former bank and, on and from the commencement of this Ordinance, the former banking licence held by the former bank is deemed by virtue of section 143 to be a banking licence, then, on and from that commencement, to the extent that but for the enactment of this Ordinance that act, matter or thing would on or after that commencement have had any force or effect or been in operation, that act, matter or thing shall, in the like manner, be deemed to have been done under Part X by the Commissioner, the Financial Secretary or the Governor in Council, as the case may be, to or in relation to the bank which holds that banking licence as if, on that commencement, that act, matter or thing were, to that extent, done under Part X by the Commissioner, the Financial Secretary or the Governor in Council, as the case may be, to or in relation to the bank, and the provisions of this Ordinance shall apply accordingly. (Amended 3 of 1990 s. 49) 148. Transitional provision in relation to certain letters of comfort A letter of comfort which was, immediately before the day of -[1]- commencement of the Banking (Amendment) (No. 2) Ordinance 1991 (95 of 1991), deemed by section 148 at all times to have been accepted under paragraph (c) of the proviso to section 81 (2) shall, on and from that date, be deemed at all times to have been accepted under section 81 (6) (b), and the provisions of this Ordinance shall apply accordingly.

(Replaced 95 of 1991 s. 49) -[1]- Commencement date-1.8.1991.

148A. Transitional provisions in relation to section 87 (1) Where, immediately before 1 September 1986, any period allowed under the proviso to section 27 (1) of the former Banking Ordinance, or under section 23B (3) of the former Deposit-taking Companies Ordinance, had not expired then, on and from that date, the unexpired portion of that period shall be deemed to be a further period approved under, and for the purposes of, the proviso to section 87 (1) as if, on that date, the Commissioner had given such approval under the proviso to section 87 (1), and the provisions of this Ordinance shall apply accordingly.

(2) Where, immediately, before 1 September 1986, any period allowed under section 23B(2) of the former Deposit-taking Companies Ordinance had not expired then, on and from that date, the unexpired portion of that period shall be deemed to be a further period approved under, and for the purposes of, section 87 (2) (a) as if, on that date, the Commissioner had given such approval under section 87 (2) (a), as if, on that date, the Commissioner had given such approval under section 87 (2) (a), and the provisions of this Ordinance shall apply accordingly.

(3) Where, immediately before 1 September 1986, there was in force any approval under section 27 (2) of the former Banking Ordinance then, on and from that date, any such approval shall be deemed to be an approval under, and for the purposes of, section 87 (2) (b) as if, on that date, the Commissioner had given such approval under section 87 (2) (b).

(Added 64 of 1987 s. 29) 149. Transitional provisions in relation to amendments made by Banking (Amendment) Ordinance 1990 (1) In this section- "deposit-taking licence" means a deposit-taking licence- (a) granted, or deemed to be granted, under section 25 as in force at any time before the relevant day; and (b) in force immediately before the relevant day; "licensed deposit-taking company" means a company which, immediately before the relevant day, held a deposit-taking licence; "relevant day" means the day of commencement of the relevant Ordinance; "relevant Ordinance" means the Banking (Amendment) Ordinance 1990 (3 of 1990).

(2) Where, immediately before the relevant day, there was an application for a deposit-taking licence under section 24 in relation to which the Financial Secretary had not granted or refused a deposit-taking licence under section 25 then, on and from the relevant day, that application shall be deemed to be an application under section 24 for a restricted banking licence, and the provisions of this Ordinance shall apply accordingly.

(3) Any deposit-taking licence shall, on and from the relevant day, be deemed to be a restricted banking licence granted under section 25, and the Provisions of this Ordinance shall apply accordingly.

(4) Notwithstanding Part VI as in force immediately before the relevant day, any deposit-taking licence which was, immediately before the relevant day, suspended under that Part shall, on and from the relevant day, be deemed, for the purposes of subsection (3) and the definition of "deposit- taking licence" in subsection (1), to have been in force immediately before the relevant day.

(5) Where, immediately before the relevant day, there was in force any condition attached to a deposit-taking licence under section 25 and, on and from the relevant day, the deposit-taking licence is deemed by virtue of subsection (3) to be a restricted banking licence, then, on and from the relevant day, any such condition shall be deemed to be a condition attached to the restricted banking licence as if, on the relevant day, the Financial Secretary had attached such condition under section 25 to the restricted banking licence, and the provisions of this Ordinance shall apply accordingly.

(6) Where any deposit-taking licence which is, on and from the relevant day, deemed by virtue of subsection (3) to be a restricted banking licence, was, immediately before the relevant day, suspended under Part VI, then, on and from the relevant day, that restricted banking licence shall, in the like manner, be deemed to be suspended under Part VI for the period concerned of such suspension left to serve immediately before the relevant day as if, on the relevant day and for that period, the designated authority under Part VI had suspended that restricted banking licence, and the provisions of this Ordinance shall apply accordingly.

(7) Where an act, matter or thing has been done or deemed to be done under Part X as in force at any time before the relevant day by the Commissioner, the Financial Secretary or the Governor in Council to or in relation to a licensed deposit-taking company and, on and from the relevant day, the deposit-taking licence held by that company is deemed by virtue of subsection (3) to be a restricted banking licence, then, on and from the relevant day, to the extent that but for the enactment of the relevant Ordinance that act, matter or thing would on or after the relevant day have had any force of effect or been in operation, that act, matter or thing shall, in the like manner, be deemed to have been done under Part X by the Commissioner, the Financial Secretary or the Governor in Council, as the case may be, to or in relation to the restricted licence bank which holds that restricted banking licence as if, on the relevant day, that act, matter or thing were, to that extent, done under Part X by the Commissioner, the Financial Secretary or the Governor in Council, as the case may be, to or in relation to the restricted licence bank, and the provisions of this Ordinance shall apply accordingly.

(8) To the extent that any of the other provisions of this Part have any force or effect or are in operation on or after the relevant day, any reference in those provisions to- (a) a deposit-taking licence shall be deemed to be a reference to a restricted banking licence; and (b) a licensed deposit-taking company shall be deemed to be a reference to a restricted licence bank, and the provisions of this Ordinance shall apply accordingly.

(9)-(13) (Repealed 95 of 1991 s. 50) (Replaced 3 of 1990 s. 50) 150. Transitional provisions in relation to amendments made by Banking (Amendment) (No.2) Ordinance 1991 (1) In this section- "relevant day" means the day of -[1]-commencement of the relevant Ordinance; -[1]- Commencement date -1.8.1991.

"relevant Ordinance" means the Banking (Amendment) (No. 2) Ordinance 1991 (95 of 1991).

(2) Section 70 shall not apply to a person becoming a controller of an authorized institution on or from the relevant day where the acts or circumstances by virtue of which he became such a controller substantially occurred before the relevant day.

(3) The definition of "controller" in section 2 (1), and sections 70, 72, 72A and 126, as in force immediately before the relevant day, shall, on and from the relevant day, apply to a person referred to in subsection (2) as they would have applied to that person if the relevant Ordinance had never been enacted.

(4) Where, immediately before the relevant day, there was in existence an application for an approval under section 70 or 72 in relation to which the Commissioner had not granted, or refused to grant, such approval, then, at any time on and from the relevant day, the Commissioner may grant, or refuse to grant, such approval as if the relevant Ordinance had never been enacted, and any such grant of, or refusal to grant, such approval made on or after the relevant day shall have such force or effect or operation as such grant of, or refusal to grant, such approval would have had if the relevant Ordinance had never been enacted.

(5) Where any person to whom section 70 or 72, as in force immediately before the relevant day, applied to had not, before the relevant day, made an application under that section for an approval in respect of the matter by virtue of which that section applies to him, then, on and from the relevant day, that section shall apply to him in respect of such matter as if the relevant Ordinance had never been enacted.

(6) Where, immediately before the relevant day, there was in existence an approval (including any conditions to which such approval is subject), or refusal to grant an approval, under section 70 or 72, then, on and from the relevant day, any such approval (including any conditions to which such approval is subject) or refusal shall have such force or effect or operation as such approval or refusal would have continued to have had if the relevant Ordinance had never been enacted.

(7) For the avoidance of doubt, it is hereby declared that where subsection (3), (4), (5) or (6) applies in relation to any person at any time on and from the relevant day, such application shall be without prejudice to the application of the provisions of Part XIII in relation to such person at any time on and from the relevant day.

(8) Where an authorized institution contravenes section 74 (1)- (a) by failing to appoint not less than one alternate chief executive of the institution; and (b) at any time before the expiration of the period of 6 months immediately following the relevant day, or such further period as the Monetary Authority approves for the purposes of the application of section 71 to any person the institution proposes to appoint as an alternate chief executive, (Amended 82 of 1992 s. 25) section 74 (2) shall not apply in relation to that contravention (including at any time on or after the expiration of that period or further period, as the case may be).

(9) The financial exposure of an authorized institution under section 81 (2) shall not include financial exposure for any item referred to in paragraph (c) of that section until a notice under section 81 (3) in respect of that item is published in the Gazette.

(10) Where an authorized institution contravenes section 81 (1), 83 (1) or (2) (a), 87 (1), 88 (1) or 90 (1) at any time before the expiration of the period of one year immediately following the relevant day, or such further period as the Monetary Authority approves in writing in any particular case- (Amended 82 of 1992 s. 25) (a) section 81 (9), 83 (7), 87 (3), 88 (6) or 90 (3), as the case may be, shall not, object to paragraph (b), apply in relation to that contravention (including at any time on or after the expiration of that period or further period, as the case may be); and (b) the institution shall, for so long as that contravention of that section continues, comply with that section as if the words "paid-up capital and reserves" were substituted for the words "capital base" appearing in that section and, accordingly, section 81 (9), 83 (7), 87 (3), 88 (6) or 90 (3), as the case may be, shall apply in relation to any contravention of that section by that institution as that section applies to that institution with those substituted words.

(Added 95 of 1991 s. 51) 151. Savings in relation to Exchange Fund (Amendment) Ordinance 1992 (1) Notwithstanding the repeal of section 8 of this Ordinance by section 16 of the relevant Ordinance, where immediately before the commencement of the relevant Ordinance, a person was authorized or employed as a result of an exercise of a power under that repealed section, the exercise of such power shall continue to have effect and be regarded as having been exercised by the Monetary Authority.

(2) The repeal referred to in subsection (1) shall not be construed as affecting any authorization or employment to which section 141 applied immediately before the commencement of the relevant Ordinance.

(3) Where immediately before the commencement of the relevant Ordinance- (a) there was in existence an application to which section 142 then applied; (b) there was in force any condition to which section 145 (3), (4) or (5) then applied; (c) an act, matter or thing to which section 147 then applied had any force or effect or was in operation; (d) there was in existence an approval to which section 148A then applied; (e) an act, matter or thing to which section 149 (7) then applied had any force or effect or was in operation; or (f) there was in existence an application to which section 150 (4) then applied, then, on and from the commencement of the relevant Ordinance, the section of this Ordinance which, having regard to paragraph (a), (b), (c), (d), (e) or (f) is the relevant section, shall, in relation to such application, condition, act, matter or thing or approval as may be appropriate, be construed and have effect as if any reference therein to the "Commissioner" were substituted for by a reference to the "Monetary Authority".

(4) Notwithstanding the amendment of section 150 (8) and (10) by section 25 (2) of the relevant Ordinance, any further period granted under section 150 (8) or (10) and which on the commencement of the relevant Ordinance had not expired, shall continue to run as if that section had not been so amended.

(5) Where- (a) any act, matter or thing which the Monetary Authority is required, empowered or authorized to do under or pursuant to any enactment, on or after the commencement of the relevant Ordinance, was done by any person other than the Monetary Authority before such commencement; and (b) the act, matter or thing was in force or existence immediately before such commencement, that act, matter or thing shall continue in force, or where appropriate, to exist, on and from such commencement, as if it had been done by the Monetary Authority.

(6) In this section "relevant Ordinance" means the Exchange Fund (Amendment) Ordinance 1992 (82 of 1992). (Added 82 of 1992 s. 24) FIRST SCHEDULE [ss. 2(1), 12(3), 14(1)&135(1)] SPECIFIED PERIOD AND SPECIFIED SUMS 1. 3 months.

2. The sum for the purposes of section 14 (1) (a) is $100,000 or an equivalent amount in any other currency.

3. Sum for the purposes of section 14(1) (b) is $500,000 or an equivalent amount in any other currency. (First Schedule replaced 3 of 1990 s. 51) SECOND SCHEDULE [ss. 19, 23, 26, 27, 45, 48, 51, 109, 135, (2) & 144] FEES $ 1. Annual banking licence fee for a bank, other than a restricted licence bank (section 19 (1)) 474,340 2. Registration fee (section 23 (1)) 113,020 3. Renewal of registration fee (section 23 (2)) 113,020 4. Restricted banking licence fee (section 26 (1)) 384,270 5. Renewal of restricted banking licence fee (section 26 (2)) 384,270 6. Inspection fee (section 27 (3)) 10 7. Fee for a copy or extract, per page (section 27 (3)) 5 8. Fee for the establishment of a local branch of a bank, other than a restricted licence bank (section 45 (1)) 22,400 9. Annual fee for maintaining a local branch of a bank, other than a restricted licence bank (section 45 (1) and (2)) 22,400 10. Fee for the establishment of a local branch of a restricted licence bank or deposit-taking company (section 45 (1)) 19,110 11. Annual fee for maintaining a local branch of a restricted licence bank or deposit-taking company (section 45 (1) and (2)) 19,110 12. Fee for the establishment of a local representative office of a bank incorporated outside Hong Kong (section 48 (1)) 22,400 13. Annual fee for maintaining a local representative office of a bank incorporated outside Hong Kong (section 48 (1), (2) and (3)) 22,400 14. Fee for the establishment of an overseas branch of a bank, other than a restricted licence bank (section 51 (1)) 44,800 15. Annual fee for maintaining an overseas branch of a bank, other than a restricted licence bank (section 51 (1) and (2)) 44,800 16. Fee for the establishment of an overseas branch of a restricted licence bank or deposit-taking company (section 51 (1)) 38,400 17. Annual fee for maintaining an overseas branch of a restricted licence bank or deposit-taking company (section 51 (1) and (2)) 38,400 18. Fee for the establishment of an overseas representative office of a bank, other than a restricted licence bank (section 51 (1)) 11,200 19. Annual fee for maintaining an overseas representative office of a bank, other than a restricted licence bank (section 51 (1) and (2)) 11,200 20. Fee for the establishment of an overseas representative office of a restricted licence bank or deposit-taking company (section 51 (1)) 19,110 21. Annual fee for maintaining an overseas representative office of a restricted licence bank or deposit-taking company (section 51 (1) and (2)) 19,110 (Second Schedule replaced 26 of 1988 s. 2. Amended 14 of 1989 s. 2; 3 of 1990 s. 52; 29 of 1990 s. 2; 43 of 1990 s. 15; 41 of 1991 s. 2) THIRD SCHEDULE [ss. 98 & 135 (3)] CAPITAL ADEQUACY RATIO 1. In this Schedule- "bank" means- (a) any authorized institution (other than any restricted licence bank or deposit-taking company the licence or registration of which is for the time being suspended under this Ordinance); and (Amended 3 of 1990 s. 53) (b) any bank incorporated outside Hong Kong which is not licensed under this Ordinance, except a bank which is, in the opinion of the Monetary Authority, not adequately supervised by a recognized banking supervisory authority of the place in which it is incorporated; "book value" in relation to any thing means its current book value after deducting the amount of any specific provision made in the books against a reduction in its value; "capital base" means the capital base of an authorized institution determined in accordance with paragraph 3; "Claims on or claims guaranteed by, authorized institutions in Hong Kong" do not include any claim on or guarantee by an authorized institution the licence or registration of which, as the case may be, is for the time being suspended under this Ordinance; "Core Capital" means the sum, calculated in Hong Kong dollars, of the book values of the capital items listed in paragraph 3 (a) to (f); "debt securities" means securities other than shares or stocks; "gold bullion held on an allocated basis" means gold bullion held by a person other than the authorized institution, to the order of the authorized institution, and which is separately ascertainable; "guarantee" includes indemnity; "multilatcral development bank" means the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the European Investment Bank, the Nordic Investment Bank, the Caribbean Development Bank, the European Bank for Reconstruction and Development or the International Finance Corporation; (Amended L.N. 407 of 1991) "public sector entity in Hong Kong" means the Mass Transit Railway Corporation, the Kowloon-Canton Railway Corporation, the Hong Kong Housing Authority and any body specified by the Monetary Authority in a notice published in the Gazette; "public sector entity of any other Tier 1 country" means an entity which is regarded as a public sector entity by a recognized banking supervisory authority in the place in which it is incorporated; "residential mortgage" means a mortgage under which- (a) the borrower is an individual person; (b) the principal sum does not exceed 90% of the purchase price or the market value of the property, whichever amount is the lower; (c) the debt is secured by a first legal charge on the property; (d) the property secured by the charge is used as the borrower's residence or as a residence by a tenant of the borrower; "risk weighted exposure" means the risk weighted exposure of an authorized institution determined in accordance with paragraph 4; "Supplementary Capital" means the sum, calculated in Hong Kong dollars, of the book values of the capital items listed in paragraph 3 (g) to (0) calculated in accordance with that paragraph; "Tier 1 country" means a country which is a member of the Organization for Economic Co-operation and Development or a country which has concluded a special lending arrangement with the International Monetary Fund associated with the Fund's General Arrangements to Borrow, and also includes Hong Kong; "Tier 2 country" means any country which is not a Tier 1 country.

2. The capital adequacy ratio of an authorized institution shall be calculated as the ratio, expressed as a percentage, of its capital base, determined in accordance with paragraph 3, to its risk weighted exposure determined in accordance with paragraph 4. 3. The capital base of an authorized institution shall be determined by taking the sum, calculated in Hong Kong dollars, of the book values (except in relation to subparagraph (i), where the difference between the market value and the book value is to be taken) of- Category I-Core Capital (a) its paid-up ordinary share capital; (b) its paid-up, irredeemable, non-cumulative preference shares, that is to say, shares that are irredeemable or that may be redeemed only with the prior consent of the Monetary Authority; (Amended L.N. 82 of 1993) (c) its share premium account; (d) its reserves other than those referred to in subparagraphs (e), (g), (h) and (i); (e) its profit and loss account including its current year's profit or loss; (f) where the Monetary Authority requires under section 79A (1) a provision of Part XV to apply to the authorized institution on a consolidated basis, or requires under section 98 (2) the capital adequacy ratio of the authorized institution to be calculated on a consolidated basis, minority interests arising on such consolidation in the equity of its subsidiaries: (Amended 95 of 1991 s. 52) Provided that the amount to be included as Core Capital shall be determined by deducting therefrom the book value calculated in Hong Kong dollars of the goodwill of the institution; Category II-Supplementary Capital (g) its inner reserves; (h) its reserves on revaluation of its real property, but not exceeding 70% of any surplus on revaluation; (i) its latent reserves (i.e. the difference between the market value and the book value) determined upon revaluation, of long-term holding of equity securities listed on the Unified Exchange or on any exchange referred to in the Schedule to the Securities (Specification of Approved Assets, Liquid Assets and Ranking Liabilities) Notice 1990 (Cap. 333 sub.

leg.): (Amended L.N. 210 of 1990; L.N. 63 of 1991) Provided that- (i) the amount of any increase in value to be included shall be limited to 45% of such increase; (ii) the amount of any diminution in value is deducted; (j) its general provisions against doubtful debts but not including any provisions against specific or identified losses and against the diminution in the value of particular assets: Provided that the amount included under this subparagraph may not exceed 1.25% of the figure derived by the calculation specified in subparagraph (a) of paragraph 4 carried out in relation to the authorized institution; (Amended L.N. 210 of 1990) (k) its perpetual subordinated debt where the Monetary Authority is satisfied that under the terms of the debt instrument the following conditions are met- (i) the claims of the lender against the authorized institution are fully subordinated to those of all unsubordinated creditors; (ii) the debt is not secured against any assets of the authorized institution; (iii) the money advanced to the authorized institution is permanently available to it; (iv) the debt is not repayable without the prior consent of the Monetary Authority; (v) the money advanced to the authorized institution is available to meet losses without the institution being obliged to cease trading; (vi) the authorized institution is entitled to defer the payment of interest where its profitability will not support such payment; (l) its paid-up irredeemable cumulative preference shares, that is to say, shares that are irredeemable or that may be redeemed only with the prior consent of the Monetary Authority; (m) its term subordinated debt, where the Monetary Authority is satisfied that under the terms of the debt instrument the following conditions are met- (i) the claims of the lender against the authorized institution are fully subordinated to those of all unsubordinated creditors; (ii) the debt is not secured against any assets of the authorized institution; (iii) the debt has a minimum initial period to maturity of more than 5 years (and notwithstanding that that period may be reduced with the prior consent of the Monetary Authority); (Amended L.N. 210 of 1990) (iv) the debt is not repayable without the prior consent of the Monetary Authority; Provided that- (A) amounts included under this subparagraph shall be discounted by 20% each year during the 4 years immediately preceding maturity; and (B) the total amount included under this subparagraph and subparagraph (n) shall not exceed in total, 50% of the total of the Core Capital; (n) its paid-up term preference shares, where the Monetary Authority is satisfied that the shares have been issued and remain subject to the following conditions- (i) the shares have a minimum initial period to maturity of more than 5 years; (ii) the shares are not redeemable without the prior consent of the Monetary Authority; Provided that- (A) amounts included under this subparagraph shall be discounted by 20% of the original amount each year during the 4 years immediately preceding maturity; and (B) the total amount included under this subparagraph and subparagraph (m) shall not exceed in total, 50% of the total of the Core Capital; and (o) where the Monetary Authority requires under section 79A (1) a provision of Part XV to apply to the authorized institution on a consolidated basis, or requires under section 98 (2) the capital adequacy ratio of the authorized institution to be calculated on a consolidated basis, any minority interests arising on such consolidation in the paid-up irredeemable cumulative preference shares and paid-up term preference shares of its subsidiaries: (Amended 95 of 1991 s. 52) Provided that the amount to be included as Supplementary Capital shall not exceed the total of the amount determined as Core Capital, and by deducting therefrom the sum calculated in Hong Kong dollars of the book value of- (A) its shareholding in any company which is a subsidiary or holding company of the authorized institution, other than- (i) any shareholding that falls to be deducted under subparagraph (B), (C) or (D); and (ii) where the Monetary Authority requires under section 79A (1) a provision of part XV to apply to the authorized institution on a consolidated basis, or requires under section 98 (2) the capital adequacy ratio of the authorized institution to be calculated on a consolidated basis its shareholding in any subsidiary the subject of such consolidation; (Amended 95 of 1991 s. 52) (B) its loans to shares and debentures issued by, and its guarantees of the liabilities of, connected companies of the authorized institution (other than shares that fall to be deducted under subparagraph (D)), where in the opinion of the Monetary Authority the institution has made the loans, is holding the shares or debentures or, as the case may be, has given the guarantees, other than in the ordinary course of business; and for the purposes of this subparagraph "shares" and "debentures" mean shares and debentures within the meaning of section 2 (1) of the Companies Ordinance (Cap. 32), and a company shall be treated as a connected company of the institution if it is a subsidiary or the holding company of the institution, or is otherwise of a description falling within section 64 (1) (b), (c), (d) or (e); (C) its shareholding in any company in which the authorized institution is entitled to exercise, or control the exercise of, more than 20% of the voting power at general meetings of the company; and (D) its holding of shares, stocks or debt securities issued by any bank unless the Monetary Authority is satisfied that the holding is not the subject of an arrangement in which 2 or more persons agree to hold each other's capital or is not otherwise a strategic investment.

4. The risk weighted exposure of an authorized institution shall be that figure derived by- (a) adding together all the products achieved by- (i) taking the book value, calculated in Hong Kong dollars, of each of the items referred to in Table A in relation to the authorized institution; and, in relation to each item multiplying that value by the risk weight specified in Table A in relation to that item; and (ii) taking the principal amount, calculated in Hong Kong dollars, of each of the items referred to in Table B in relation to the authorized institution; and, in relation to each item converting that principal amount into a credit equivalent amount by multiplying the principal amount by the credit conversion factor specified in Table B in relation to that item, and then multiplying those credit equivalent amounts by the appropriate risk weight specified in Table A as if the items to which they relate were on-balance sheet (Table A) items; and (b) subtracting from the sum calculated under subparagraph (a) the value of general provisions not included in the capital base of the authorized institution. (Replaced L.N. 210 of 1990) TABLE A-ON-BALANCE SHEET ITEMS Category I-Cash items Item Nature of item Risk weight 1. Notes and coins. 0% 2. Hong Kong Government certificates of indebtedness. 0% 3. Gold bullion in the possession of an authorized institution or held on an allocated basis, to the extent backed by gold liabilities. 0% 4. Gold held which is not backed by gold liabilities. 100% 5. Claims to the extent that they are collateralized by cash deposits held by the authorized institution. 0% 6. Cash items in the course of collection. 20% 6A. Amounts due from the sale of securities, where the authorized institution has executed the transaction on behalf of a customer or for its own account, up to and including the fifth working day after the due settlement date in respect of the transaction. (Added L.N. 146 of 1993) 0% 6B. Amounts due from the purchase of securities, where the authorized institution has executed the transaction on behalf of a customer, up to and including the fifth working day after the due settlement date in respect of the transaction. (Added L.N. 146 of 1993) 0% Category II-Claims on central governments and central banks Item Nature of item Risk weight 7. Loans to, or loans to the extent that they are guaranteed by, the Exchange Fund. 0% 8. Loans to, or loans to the extent that they are guaranteed by, the central government or the central bank of any Tier 1 country 0% 9. Holdings of fixed interest securities with a residual maturity of under 1 year or floating rate securities of any maturity issued by or guaranteed by the central government or by the central bank of a Tier 1 country, or by the Exchange Fund, or claims to the extent that they are collateralized by such securities. 10% 10. Holdings of fixed interest securities with a residual maturity of 1 year and over issued by or guaranteed by the central government or by the central bank of a Ticr 1 country, or by the Exchange Fund, or claims to the extent that they are collateralized by such securities. 20% Item Nature of item Risk weight 11. Loans denominated in the currency of a Tier 2 country and funded in that currency, to, or to the extent that they are guaranteed by, the central government or the central bank of that country. 0% 12. Holdings of fixed interest securities with a residual maturity of under 1 year or floating rate securities of any maturity issued by or guaranteed by the central government or by the central bank of a Tier 2 country, where denominated and funded in the currency of that country.

10% 13. Holdings of fixed interest securities with a residual maturity of 1 year and over issued by or guaranteed by the central government or by the central bank of a Tier 2 country, where denominated and funded in the currency of that country. 20% 14. Other claims on the central government or on the central bank of a Tier 2 country. 100% Category III- Claims on Public Sector Entities Item Nature of item Risk weight 15. Claims on or to the extent that they are guaranteed by, public sector entities in Hong Kong. 20% 16. Claims on or to the extent that they are guaranteed by, public sector entities of any other Tier 1 country. 20% 17. Claims on public sector entities of a Tier 2 country. 100% Category IV-Claims on banks Item Nature of item Risk weight 18. Claims on or to the extent that they are guaranteed by, authorized institutions or banks incorporated in Tier 1 countries. 20% 19. Claims on or to the extent that they are guaranteed or collateralized by securities issued by, a multilateral development bank.

20% 20. Claims on or to the extent that they are guaranteed by, and bank other than a bank referred to in item 18 or 19, with a residual maturity of under 1 year. 20% 21. Claims on or to the extent that they are guaranteed by, any bank other than a bank referred to in item 18 or 19, with a residual maturity of 1 year or more. 100% Category V-Residential Mortgages Item Nature of item Risk Weight 22. Loans fully secured by a residential mortgage. 50% 23. Securities backed by residential mortgages and participations in residential mortgages. 50% Category VI-Other assets Item Nature of item Risk weight 24. Claims on non-bank private sector persons. 100% Category VI-Other assets Item Nature of item Risk weight 25. Investments in the equity or other capital instruments of other banks, other than where deducted from the capital base. 100% 26. Premises, piant and equipment and other fixed assets for the authorized institution's own use. 100% 27. Other interests in real property. 100% 28. All assets not elsewhere specified. 100% TABLE B-OFF-BALANCE SHEET ITEMS Item Nature of item Credit conversion factor 1. Direct credit substitutes Irrevocable off-balance sheet obligations which carry the same credit risk as a direct extension of credit. This includes guarantees, the confirming of letters of credit, standby letters of credit serving as financial guarantees for loans, securities and acceptances (including endorsements with the character of acceptances) other than acceptances included in item 3. 100% 2. Transaction-related contingencies Contingent liabilities which involve an irrevocable obligation of the authorized institution to pay a beneficiary when a customer fails to perform some contractual, non-financial obligation. This includes performance bonds, bid bonds, warranties and standby letters of credit related to a particular transaction. 50% 3. Trade-related contingencies Contingent liabilities which relate to trade related obligations. This includes letters of credit, acceptances on trade bills, shipping guarantees and any other trade related contingencies. 20% 4. Sale and repurchase agreements (see Note 1) Arrangements whereby the authorized institution sells a loan, security or other asset to another person with a commitment to repurchase the asset at an agreed price on an agreed future date. 100% 5. Assets sales or other transactions with recourse (see Note 1) Assets sales where the holder of the asset is entitled to put the asset back to the authorized institution within an agreed period or should the value or credit quality of the asset deteriorate. 100% 6. Forward asset purchases (see Note 1) Commitment to purchase a loan, security or other asset, including under a put option granted by the authorized institution to another party, at specified future date on pre- arranged terms. 100% 7. Partly paid-up shares and securities (held by the authorized institution) The unpaid portion of shares or securities which the issuer of such shares or securities may call for at a future date. 100% Item Nature of item Credit conversion factor 8. Forward forward deposits placed (Amended L.N. 210 of 1990) Any agreement between the authorized institution and another party whereby the institution will place a deposit at an agreed rate of interest with that party at some predetermined future date. 100% 9. Note issuance and revolving underwriting facilities Arrangements whereby a borrower may draw down funds up to a prescribed limit over a predefined period by making repeated note issues to the market, and where, should the issue prove unable to be placed in the market, the unplaced amount is to be taken up or funds made available by the underwriter of the facility. 50% 10. Other commitments with an original maturity of under 1 year or which may be cancelled at any time unconditionally by the authorized institution. 0% 11. Other commitments with an original maturity of 1 year or over. 50% 12. Exchange rate contracts (see Note 2) (Calculated in accordance with either the original exposure method or the current exposure method) (a) credit conversion factors to be used in calculating in accordance with original exposure method-contracts with an original maturity of- (i) under 1 year, 2% (ii) 1 year and less than 2 years; 5% (iii) 2 years or more, the factor for 1 year and less than 2 years plus for each additional year; 3% (b) credit conversion factors to be used to determine the potential future credit exposure in accordance with the current exposure method- contracts with a residual maturity of- (i) under 1 year; 1% (ii) 1 year and over. 5% 13. Interest rate contracts (see Note 2) (Calculated in accordance with either the original exposure method or the current exposure method) (a) credit conversion factors to be used in calculating in accordance with the original exposure method-contracts with an original maturity of- (i) under 1 year; 0.5% (ii) 1 year and under 2 years; 1% (iii) 2 years or more, the factor for 1 year and under 2 years plus for each additional year; 1% (b) credit conversion factors to be used to determine the potential future credit exposure in accordance with the current exposure method- contracts with a residual maturity of- (i) under 1 year; 0% (ii) 1 year and over. 0.5% Note 1. The appropriate risk weight to be used in relation to transactions to which items 4, 5 and 6 apply, shall be determined on the basis of the nature of the asset and not the nature of the counterpart with whom the transaction has been entered into. Reverse repos (i. e. purchase and resale agreements where the authorized institution is the recipient of the asset) are to be regarded as collatcralized loans.

2. In relation to exchange rate contracts and interest rate contracts an authorized institution shall, in determining the credit equivalent amount use either the current exposure method of valuation or, with the agreement of the Monetary Authority, the original exposure method of valuation.

(Third Schedule replaced L.N. 412 of 1989. Amended 82 of 1992 s. 25) FOURTH SCHEDULE [ss. 102 & 135(3)] LIQUIDITY RATIO 1. In this Schedule- "relevant bank" means- (a) any authorized institution (other than a deposit-taking company or restricted licence bank the registration or restricted banking licence of which is for the time being suspended under this Ordinance); and (Replaced L.N. 413 of 1987. Amended 3 of 1990 s. 54) (b) any bank incorporated outside Hong Kong which is not licensed under this Ordinance, except a bank which is, in the opinion of the Monetary Authority, not adequately supervised by an appropriate, recognized banking supervisory authority in the place in which it is incorporated, (Amended 82 of 1992 s. 25) and includes the Exchange Fund established by the Exchange Fund Ordinance (Cap. 66); (Amended 64 of 1987 s. 30) "one-month liability" in relation to any authorized institution or relevant bank means- (a) any liability, other than a contingent liability, the effect of which will or could be to reduce within 1 month the liquefiable assets of that institution or relevant bank; and (b) any contingent liability that in the opinion of the Monetary Authority may result in a reduction within 1 month of the liquefiable assets of that institution or relevant bank. (Amended 82 of 1992 s. 25) 2. The liquidity ratio of an authorized institution shall be calculated as the ratio expressed as a percentage, between its liquefiable assets, as specified in paragraph 3 and its qualifying liabilities, as specified in paragraph 4.

3. The liquefiable assets of an authorized institution shall be the sum, calculated in Hong Kong dollars, of such of the following amounts which are free from encumbrances and freely remittable and payable- (Amended L.N. 413 of 1987) (a) the amount, if any by which its total one-month liabilities to relevant banks are exceeded by the total one-month liabilities of relevant banks to it; (b) currency notes and coins held by the institution in Hong Kong dollars or in any currency freely convertible into Hong Kong dollars; (c) repayments to the institution in respect of loans that the institution is not committed to continue, whether by renewal or otherwise, being repayments- (Amended L.N. 413 of 1987) (i) which will fall due within 1 month; (ii) in respect of which the institution has no reason to expect any default; and (iii) which are not otherwise taken into account in calculating the liquefiable assets of the institution; (d) the amounts that the institution can realize within 1 month (after deduction of the costs of such realization) for such of its following assets as are available to meet any or all of its qualifying liabilities- (i) export bills maturing within 6 months, or payable after sight, and discountable in Hong Kong dollars or in a currency freely convertible into Hong Kong dollars; (ii) securities that were issued, or are the subject of any guarantee or indemnity given, by the Government or by any government approved by the Monetary Authority for the purposes of this subparagraph; (Amended 82 of 1992 s. 25) (iii) other bills, certificates, notes, paper or debt securities which- (A) are negotiable; (B) have a remaining term to maturity of not more than 10 years; and (C) are denominated and traded in Hong Kong dollars or in a currency freely convertible into Hong Kong dollars, except for any that are issued by a person or government specified for the purposes of this sub-paragraph by the Monetary Authority by notice in writing served upon the authorized institution; (Amended 82 of 1992 s. 25) (iv) gold.

4. The qualifying liabilities of an authorized institution shall be the sum, calculated in Hong Kong dollars of- (a) the amount, if any, by which the total one-month liabilities of relevant banks to the authorized institution are exceeded by its total one-month liabilities to relevant banks; and (Amended L.H. 413 of 1987) (b) the total of its other one-month liabilities.

FIFTH SCHEDULE [ss. 92 (5) (c) & (7) & 135 (3)] REQUIREMENTS APPLICABLE TO PRESCRIBED ADVERTISEMENTS 1. Interpretation (1) In this Schedule- "deposit-taker", in relation to a prescribed advertisement, means the person with whom the deposits which are invited by the advertisement are to be made; "full name", in relation to a person, means the name under which that person carries on business and, if different and if that person is a body corporate, its corporate name; "liabilities" includes provisions where such provisions have not been deducted from the value of assets.

(2) A reference in this Schedule to the payment of interest in respect of a deposit includes a reference to the payment of any premium in respect of the deposit, and to the crediting of interest to the deposit so as to constitute an accretion to the principal.

(3) For the purposes of this Schedule, a prescribed advertisement which contains information which is intended or might reasonably be presumed to be intended to lead directly or indirectly to the making of a deposit shall be treated as if it contained an invitation to make a deposit, and references to an invitation to make a deposit shall be construed accordingly.

2. Warning Every prescribed advertisement shall contain a prominent warning to the effect that the deposit-taker is not an authorized institution within the meaning of this Ordinance and is therefore not subject to the supervision of the Monetary Authority. (Amended 82 of 1992 s. 25) 3. General requirements for prescribed advertisements Every prescribed advertisement shall state- (a) the full name of the deposit-taker; (b) the country or territory in which the deposit-taker's principal place of business is situated, described as such; and (c) if the deposit-taker is a body corporate, the country or territory in which it is incorporated, described as such, unless this is the same as the country or territory referred to in subparagraph (b).

4. Assets and liabilities (1) Every prescribed advertisement shall state the amount of the paid-up capital and reserves, described as such, of the deposit-taker (if a body corporate) or the amount of the total assets less liabilities, described as such, of the deposit-taker (if a person other than a body corporate).

(2) Where a prescribed advertisement contains any reference to the amount of the assets of the deposit-taker, it shall state the total amount of the deposit-taker's liabilities, described as such, which statement shall be not less prominent than such reference.

(3) Subparagraphs (1) and (2) shall be treated as complied with if the prescribed advertisement states that the amount of any assets or paid-up capital and reserves required to be stated exceeds an amount specified in the advertisement or that the amount of any liabilities required to be stated does not exceed an amount so specified.

(4) A prescribed advertisement shall not contain any reference to the assets or liabilities of any person other than the deposit-taker.

5. Deposit protection arrangements A prescribed advertisement shall not state or imply that the deposits which are invited or their repayment, or interest or the payment of interest in respect of them, will be guaranteed, secured, insured, or the subject of any other form of protection, unless it states- (a) the form of the protection; (b) the extent of the protection; and (c) the full name of the person who will be liable to meet any claim by the depositor by virtue of the arrangements conferring the protection.

6. Interest (1) This paragraph applies to a prescribed advertisement which specifies the rate at which interest will be payable in respect of the deposits which are invited.

(2) Every prescribed advertisement to which this paragraph applies shall state- (a) the minimum amount, if any, which must be deposited to earn that rate of interest; (b) the period of time, if any, during which no interest will be payable; (c) the minimum period of time, if any, during which a deposit must be retained by the deposit-taker in order to earn that rate of interest; (d) the minimum period of notice, if any, which must be given before repayment may be required of a deposit earning that rate of interest; and (e) the intervals at which the interest will be paid.

(3) If the rate of interest which is specified is not an annual rate of simple interest, the prescribed advertisement shall state the basis on which the rate will be calculated.

(4) If the rate of interest which is specified may be varied during the period for which the deposit will be held this shall be stated in the prescribed advertisement.

(5) If interest will or may not be paid in full at the rate which is specified, this shall be stated in the prescribed advertisement, and the advertisement shall state the nature and the amount of or rate of any deductions which will or may be made from the interest before payment.

(6) If the rate of interest which is specified is or may not be the rate at which interest will be payable in respect of the deposits on the date on which the prescribed advertisement is issued, this shall be stated in the advertisement, and the advertisement shall state the date on which interest was payable at the rate which is specified, such date being as close as is reasonably practicable to the date on which the advertisement is issued.

(7) If the prescribed advertisement specifies more than one rate of interest payable in respect of deposits of a particular amount, the advertisement shall contain the information required by any of subparagraphs (2) to (6) in relation to each such rate. (8) Where different rates of interest apply to deposits of different amounts, the prescribed advertisement shall contain the information required by any of subparagraphs (2) to (6) in relation to each such rate.

7. Currency Every prescribed advertisement shall state the currency in which the deposits are to be made.

8. Supplementary provisions (1) Subject to subparagraph (2), the matters required by this Schedule to be included in a prescribed advertisement shall be shown clearly and legibly or, in the case of an advertisement by way of sound broadcasting, spoken clearly.

(2) In the case of a prescribed advertisement by way of television or exhibition or cinematographic film, the matters required by this Schedule to be included shall be shown clearly and legibly or spoken clearly.

(Fifth Schedule replaced 95 of 1991 s. 53) ution but neither of the events specified in section 70 (3) (b) has occurred; (ii) no notice in writing has been served under section 70 (5) in respect of that contravention; (iii) a notice in writing has been served under section 70 (5) on the Monetary Authority by that person in respect of that contravention, the Monetary Authority has served a notice of objection under section 70 (6) on that person in respect of that contravention, and either- (A) the period specified in the Administrative Appeals Rules (Cap. 1 sub. leg.) within which that person may appeal under section 70 (15) against the decision of the Monetary Authority to serve such notice of objection has expired without any such appeal having been made; or (B) an appeal under section 70 (15) by that person against the decision of the Monetary Authority to so serve such notice of objection is unsuccessful; or (iv) that person has been convicted of an offence under section 70 (18) in respect of that contravention; or (b) continues to be a minority shareholder controller of an authorized institution after having been served with a notice of objection under section 70A (3) in respect of his being such a controller and either- (i) the period specified in the Administrative Appeals Rules (Cap. 1.

sub. leg.) within which that person may appeal under section 70A (8) against the decision of the Monetary Authority to so serve such notice of objection has expired without any such appeal having been made; or (ii) an appeal under section 70A (8) by that person against the decision of the Monetary Authority to so serve such notice of objection is unsuccessful.

(3) Subject to subsection (8), the Monetary Authority may, by notice in writing served on the person concerned, direct that any specified shares to which this section applies shall, until further notice, be subject to one or more of the following restrictions- (a) any transfer of those shares or, in the case of unissued shares, any transfer of the right to be issued with them, and any issue of such shares, shall be void; (b) no voting rights shall be exercisable in respect of the shares; (c) no further shares shall be issued in right of them or pursuant to any offer made to their holder; (d) except in a liquidation, no payment shall be made of any sums due from the authorized institution, or other company, concerned on the shares, whether in respect of capital or otherwise.

(4) Where shares are subject to the restrictions under subsection (3) (a), any agreement to transfer the shares or, in the case of unissued shares, the right to be issued with them, shall be void.

(5) Where shares are subject to the restrictions under subsection (3) (c) or (d), an agreement to transfer any right to be issued with other shares in right of those shares, or to receive any payment on them (otherwise than in a liquidation), shall be void.

(6) Where shares are subject to any restrictions under subsection (3), any person affected by any of those restrictions may request the Monetary Authority to make an application referred to in subsection (7) (a) in respect of those shares and, where such a request is made, the Monetary Authority shall, not later than 1 month after that request has been made- (a) if, by virtue of subsection (9), the Monetary Authority is prohibited from making such an application, serve a notice in writing on that person stating that he is so prohibited; (b) in any other case- (i) comply with that request; or (ii) serve a notice in writing on that person stating that he does not propose to comply with that request.

(7) Subject to subsection (9), the High Court may- (a) on the application of the Monetary Authority, order the sale of any specified shares to which this section applies and, if they are for the time being subject to any restrictions under subsection (3), that they shall cease to be subject to those restrictions; (b) on the application of a person who has made a request under subsection (6) where- (i) paragraph (b) of that subsection applies in respect of that request; and (ii) he has been served with a notice in writing under paragraph (b) (ii) of that subsection in respect of that request; or (iii) the period specified in that subsection has expired and neither of the events referred to in paragraph (b) of that subsection has occurred in respect of that request, order the sale of any shares to which that request relates and that they shall cease to be subject to any restrictions under subsection (3).

(8) Where the Monetary Authority has, by virtue of subsection (2) (a) (ii), served a notice in writing under subsection (3) on the person concerned and- (a) that person has, not later than 14 days after the service of that notice, served a notice in writing under section 70 (5) on the Monetary Authority in respect of the contravention of section 70 (3) to which that first-mentioned notice relates; and (b) either- (i) no notice of objection under section 70 (6) has been served by the Monetary Authority on that person in respect of that contravention within the period in respect of which section 70 (9) (b) permits such a notice of objection to be so served; or (ii) such a notice of objection has been so served within that period but an appeal under section 70 (15) by that person against the decision of the Monetary Authority to so serve such notice of objection is successful, whichever first occurs, the Monetary Authority shall forthwith serve a notice in writing on that person to the effect that the first-mentioned notice is revoked.

(9) The Monetary Authority shall not, by virtue of subsection (2) (a) (ii), make an application referred to in subsection (7) (a) unless- (a) the application relates to shares which are the subject of a notice in writing under subsection (3); and (b) the person upon whom that notice has been served has not, within 14 days after the service of that notice, served a notice in writing under section 70 (5) in respect of the contravention of section 70 (3) to which that first-mentioned notice relates: Provided that this subsection shall be without prejudice to the Monetary Authority's power, by virtue of subsection (2) (a) (iii), to subsequently make such an application in respect of those shares. (Amended 82 of 1992 s. 19) (10) Where an order has been made under subsection (7), the High Court may, on the application of the Monetary Authority, make such further order relating to the sale or transfer of the shares as it thinks fit.

(11) Where shares are sold pursuant to an order under this section, the proceeds of the sale, less the costs of the sale, shall be paid into court for the benefit of the persons beneficially interested in them, and any such person may apply to the High Court for an order that the whole or part of the proceeds be paid to him.

(12) This section shall apply- (a) to all the shares in the authorized institution concerned by virtue of which the person concerned is a minority shareholder controller of the institution which are held by him or any associate of his and were not so held immediately before he became such a controller; and (b) where the person concerned became a minority shareholder controller of the authorized institution concerned by virtue of the acquisition by him or any associate of his of shares in another company, to all the shares in that company which are held by him or any associate of his and were not so held immediately before he became such a controller.

(13) A copy of a notice in writing served under subsection (3) or (8) on the person concerned shall be served on the authorized institution or other company to whose shares it relates and, if it relates to shares held by any associate of that person, on that associate.

(14) The Chief Justice may make rules regulating the practice and procedure in connection with applications (including any class of applications) made under subsection (7).

(Added 95 of 1991 s. 18. Amended 82 of 1992 s. 25) 70C. Prohibition on certain persons acting as indirect controllers (1) In this section, "prohibited person", in relation to an authorized institution, means any person- (a) who has been served with a notice of objection under section 70 (6) in respect of his becoming or being, as the case may be, an indirect controller of the institution and either- (i) the period specified in the Administrative Appeals Rules (Cap. l sub. leg.) within which that person may appeal under section 70 (15) against the decision of the Monetary Authority to so serve such notice of objection has expired without any such appeal having been made; or (ii) an appeal under section 70 (15) by that person against the decision of the Monetary Authority to so serve such notice of objection is unsuccessful; or (b) who has been served with a notice of objection under section 70A (3) in respect of his being an indirect controller of the institution and either- (i) the period specified in the Administrative Appeals Rules (Cap. I sub. leg.) within which that person may appeal under section 70A (8) against the decision of the Monetary Authority to so serve such notice of objection has expired without any such appeal having been made; or (ii) an appeal under section 70A (8) by that person against the decision of the Monetary Authority to so serve such notice of objection is unsuccessful. (Amended 82 of 1992 s. 25) (2) No person who is a prohibited person in respect of an authorized institution shall act or continue to act, as the case may be, as an indirect controller of the institution and, accordingly, as such a controller shall not give or shall cease to give, as the case may be, any directions or instructions to the directors of the institution or of another company of which it is a subsidiary.

(3) Where any director of an authorized institution or of another company of which it is a subsidiary is given (whether directly or indirectly) any directions or instructions- (a) by a person whom the director knows, or ought reasonably to know, is a prohibited person in respect of the institution; and (b) which are, or might reasonably be construed as being, prohibited from being so given by virtue of subsection (2), the director shall forthwith notify the Monetary Authority of those directions or instructions and the circumstances in which they were so given. (Amended 82 of 1992 s. 25) (4) Any prohibited person who contravenes subsection (2) commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 500,000 and to imprisonment for 5 years; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months, and in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues.

(5) Any director who without reasonable excuse contravenes subsection (3) commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 200,000 and to imprisonment for 2 years; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months, and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues.

(Added 95 of 1991 s. 18) 70D. Punishment for attempted evasion of restrictions (1) Any person who- (a) exercises or purports to exercise any right to dispose of any shares which, to his knowledge, are for the time being subject to any restrictions under section 70B (3) or of any right to be issued with any such shares; (b) votes in respect of any such shares (whether as holder or proxy), or appoints a proxy to vote in respect of them; (c) being the holder of any such shares, fails to notify of their being subject to those restrictions any person whom he does not know to be aware of that fact but does know to be entitled (apart from the restrictions) to vote in respect of those shares whether as holder or as proxy; or (d) being the holder of any such shares, or being entitled to any right to be issued with other shares in right of them, or to receive any payment on them (otherwise than in a liquidation), enters into any agreement which is void under section 70B (4) or (5), commits an offence and is liable- (i) on conviction upon indictment to a fine of $ 200,000 and to imprisonment for 2 years; or (ii) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months.

(2) Where shares in an authorized institution or another company are issued in contravention of restrictions under section 70B (3), or payments are made by an authorized institution or another company in contravention of such restrictions, every director and every manager of the authorized institution or other company, as the case may be, who knowingly and wilfully permits such an issue of shares or the making of such a payment, as the case may be, commits an offence and is liable- (a) on conviction upon indictment to a fine of $200,000 and to imprisonment for 2 years; or (b) on summary conviction to a fine of $50,000 and to imprisonment for 6 months. (Added 95 of 1991 s. 18) 71. Chief executives and directors require Monetary Authority's approval (1) No person shall- (a) become the chief executive of an authorized institution, or a director of an authorized institution incorporated in Hong Kong, without the consent in writing of the Monetary Authority; or (Replaced 64 of 1987 s. 15) (b) if the becomes such chief executive or director without such consent, act or continue to act as such chief executive or director, as the case may be, without such consent, (Replaced 64 of 1987 s. 15) and for the purposes of this subsection consent may be given subject to such conditions as the Monetary Authority may think proper to attach thereto and shall be conveyed to the person, and the institution, concerned as soon as practicable.

(2) Where the Monetary Authority refuses to give consent under subsection (1), he shall notify the person concerned in writing of his refusal as soon as practicable.

(3) The Monetary Authority may by notice in writing to the person and the authorized institution concerned withdraw any consent given under subsection (1), or amend any condition attached to any such consent, if the Monetary Authority- (a) has given to the chief executive or director concerned not less than 7 days' advance notice of his intention to do so, specifying his reasons; and (b) has taken into account before so doing any written representation received by him from the chief executive or director concerned, and in any such case the chief executive or director concerned shall cease to act as such or, as the case may be, shall comply with the amended conditions. (Amended 64 of 1987 s. 15) (4) A person aggrieved- (a) by a refusal to grant consent, or by conditions attached to a consent, under subsection (1); (b) by the withdrawal of consent under subsection (3); or (c) by the amendment under subsection (3) of conditions attached to a consent, may appeal to the Governor in Council against the refusal, conditions, withdrawal or amendment, as the case may be, but such refusal, conditions, withdrawal or amendment shall take effect immediately notwithstanding that an appeal has been or may be made under this subsection. (Amended 64 of 1987 s. 15) (5) Any person who contravenes subsection (1) or (3) commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 200,000 and to imprisonment for 2 years; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months, and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues.

(6) (a) A person shall not be regarded for the purposes of subsection (1) as becoming a director of an authorized institution if he is appointed to serve as a director of it immediately on the expiration of a previous term by him as a director.

(b) A person who is a director of an authorized institution immediately prior to the commencement of this Ordinance shall for the purposes of this section be regarded as having the consent of the Monetary Authority under subsection (1) to continue to act as director.

(c) A person who is the chief executive of an authorized institution immediately prior to the commencement of the Banking (Amendment) Ordinance 1987 (64 of 1987) shall for the purposes of this section be regarded as having the consent of the Monetary Authority under subsection (1) to continue to act as chief executive. (Added 64 of 1987 s. 15) (7) For the purposes of this section, where a person has the consent of the Monetary Authority under subsection (1) or by virtue of subsection (6) (c) to be or continue to act as the chief executive of an authorized institution, and is such chief executive, he is not required to have the consent of the Monetary Authority under subsection (1) to be or continue to act as a director of that institution. (Added 64 of 1987 s. 15) (Amended 95 of 1991 s. 19; 82 of 1992 s. 25) 72. (Repealed 95 of 1991 s. 20) 72A. Monetary Authority may require specified persons to submit information (1) For the purposes of this section, "specified person" means- (a) any person who proposes to become a controller of an authorized institution incorporated in Hong Kong; (Replaced 95 of 1991 s. 21) (b) any person who is the chief executive of an authorized institution; (c) any person who is a director or controller of an authorized institution incorporated in Hong Kong; or (Amended 95 of 1991 s. 21) (d) any person who is seeking the consent of the Monetary Authority under section 71 (1). (Amended 82 of 1992 s. 25) (2) The Monetary Authority may require a specified person to submit such information as he may reasonably require for the exercise of his functions under this Part and such information shall be submitted within such period and in such manner as the Monetary Authority may require. (Amended 82 of 1992 s. 25) (2A) Where an authorized institution becomes aware of the fact that any person has become or has ceased to be a specified person in respect of the institution, the institution shall, not later than 14 days after becoming aware of that fact, give notice in writing to the Monetary Authority of that fact. (Added 95 of 1991 s. 21. Amended 82 of 1992 s. 25) (3) Any specified person (other than a person referred to in subsection (1) (a) or (d) who fails without reasonable excuse to comply with any requirement under subsection (2) commits an offence and is liable- (Amended 95 of 1991 s. 21) (a) on conviction upon indictment to fine of $ 200,000 and to imprisonment for 2 years and, in the case of a continuing offence, to a further fine of $ 10,000 for every day during which the offence continues; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues.

(4) Any specified person who signs any document for the purposes of complying with any requirement under subsection (2) which he knows or reasonably ought to know to be false in a material particular commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 500,000 and to imprisonment for 2 years; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months.

(5) Any specified person who produces any book, account, document, security or information for the purpose of complying with any requirement under subsection (2) which is false in a material particular commits an offence and is liable- (a) on conviction upon indictment to a fine of $500,000 and to imprisonment for 2 years; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months.

(6) Every director and every manager of an authorized institution which contravenes subsection (2A) commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 200,000 and to imprisonment for 2 years; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months, and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues. (Added 95 of 1991 s. 21) (Added 3 of 1990 s. 29) 73. Certain persons prohibited from acting as employees of authorized institutions except with consent of Monetary Authority (1) No person who- (a) is bankrupt or has entered into a composition with his creditors; (b) has been convicted in any place of an offence involving fraud or dishonesty; or (c) has been a director, or otherwise concerned in the management, of any authorized institution which has been wound up by a court or whose licence or registration, as the case may be, has been revoked, shall, without the consent in writing of the Monetary Authority, become an employee of an authorized institution or, if becoming such an employee without such consent, act, or continue to act, as such employee. (Amended 82 of 1992 s. 25) (2) Any person who contravenes this section commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 100,000 and to imprisonment for 12 months; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months.

74. Appointment of chief executive (1) Every authorized institution shall appoint a chief executive, and not less than one alternate chief executive, of the institution, each of whom shall be- (a) an individual; and (b) ordinarily resident in Hong Kong, except that, in the case of an authorized institution incorporated outside Hong Kong, such chief executive and alternate chief executive are only required to be the chief executive or alternate chief executive, as the case may be, in respect of the business in Hong Kong of the institution.

(Amended 95 of 1991 s. 22) (1A) Where the chief executive of an authorized institution is precluded by illness, absence from Hong Kong or any other cause from carrying out his functions as the chief executive, an alternate chief executive of the institution shall act as such chief executive. (Added 95 of 1991 s. 22) (2) Every director and every manager or an authorized institution which contravenes subsection (1) commits an offence and is liable on conviction upon indictment or on summary conviction to a fine of $ 50,000 and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues. (Amended 95 of 1991 s. 22) PART XIV 75-78. (Repealed 95 of 1991 s. 23) PART XV LIMITATIONS ON LOANS BY AND INTERESTS OF AUTHORIZED INS- TITUTIONS 79. Interpretation and application (1) In this Part- "non-listed company" means a company not listed on the Unified Exchange: Provided that any public statutory corporation designated for the purposes of this definition by the Financial Secretary by notice in the Gazette shall be deemed not to be a non-listed company; "relative" means- (a) any ascendant or descendant, any spouse or former spouse of any such ascendant or descendant, and any parent, brother or sister of any such spouse or former spouse; (b) any brother or sister, aunt or uncle and any nephew or niece and any first cousin; (c) any spouse or former spouse, any ascendant of any such spouse or former spouse, and any brother or sister, aunt or uncle or nephew or niece and any first cousin of any such spouse or former spouse, and, for the purposes of this definition, any step-child shall be deemed to be the child of both its natural parent and of its step-parent and any adopted child to be the child of the adopting parent, and a spouse shall include anyone living as such; (Amended 95 of 1991. s. 24) "value" means- (a) in the case of shares in a company, the total of the current book value and the amount for the time being remaining unpaid on the shares; and (Amended 95 of 1991 s. 24) (b) in any other case, the current book value.

(2) For the purposes of this Part, the capital base of an authorized institution means the capital base of the institution as determined in accordance with the Third Schedule except that, for those purposes, any requirement under section 98 (2) referred to in that Schedule shall not apply in determining such capital base. (Replaced 95 of 1991 s. 24) (3) For the purposes of sections 83 and 85, "unsecured" means granted without security, or, in respect of any advance, loan or credit facility granted or financial guarantee or other liability incurred with security, any part thereof which at any time exceeds the market value of assets constituting that security; and "security" means such security as would, in the opinion of the Monetary Authority, be acceptable to a prudent banker. (Amended 95 of 1991 s. 24; 82 of 1992 s. 25) (4) In relation to any authorized institution incorporated outside Hong Kong, sections 80, 82, 85, 86 and, to the extent that it relates to such an institution, section 91 shall apply only to its principal place of business in Hong Kong and its local branches, and shall do so as if that principal place of business and those branches were collectively a separate authorized institution. (Amended 64 of 1987 s. 19; 95 of 1991 s.

24) 79A. Monetary Authority may require provisions of this Part to apply to certain authorized institutions on a consolidated basis (1) Subject to subsection (2), for the purposes of the application of any provision of this Part to an authorized institution incorporated in Hong Kong which has any subsidiary, the Monetary Authority may, by notice in writing to the institution, require the provision to apply to the institution- (a) on a consolidated basis instead of on an unconsolidated basis, or (b) on both a consolidated basis and an unconsolidated basis.

(2) The Monetary Authority may, in a notice under subsection (1) to an authorized institution, require the provision of this Part to which the notice relates to apply to the institution on a consolidated basis only in respect of such subsidiaries of the institution as are specified in the notice.

(3) No duty which a subsidiary of an authorized institution may be subject to shall be regarded as contravened by reason of the submission of information by the subsidiary to the institution for the purpose of enabling or assisting the institution to comply with a notice under subsection (1) to the institution.

(Added 95 of 1991 s. 25. Amended 82 of 1992 s. 25) 80. Advance against security of own shares, etc.

(1) An authorized institution shall not grant any advances, loans or credit facilities (including letters of credit), or give any financial guarantee or incur any other liability, against the security of its own shares. (Amended 95 of 1991 s. 26) (2) An authorized institution shall not, except with the approval in writing of the Monetary Authority, which approval shall be subject to such conditions as the Monetary Authority may think proper to attach thereto, grant any advances, loans or credit facilities (including letters of credit), or give any financial guarantee or incur any other liability, against the security of the shares of -(Amended 95 of 1991 s. 26; 82 of 1992 s. 25) (a) any holding company of the institution; (b) any subsidiary of the institution; or (c) any other subsidiary of any holding company of the institution.

(3) Every director and every manager of an authorized institution which contravenes subsection (1) or (2) commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 100,000 and to imprisonment for 12 months; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months.

81. Limitation on advances by authorized institutions (1) Subject to subsections (4), (5) and (6), the financial exposure of an authorized institution incorporated in Hong Kong to- (a) any one person; (b) two or more companies which- (i) are subsidiaries of the same holding company; or (ii) have the same controller (not being a company); (c) any holding company and one or more of its subsidiaries; or (d) any one person (not being a company) and one or more companies of which that person is a controller, shall not exceed an amount equivalent to 25% of the capital base of the institution.

(2) The financial exposure of an authorized institution to any person, company or combination thereof referred to in subsection (1) (a), (b), (c) or (d) shall, for the purposes of this section, be taken to be the aggregate of- (a) all advances, loans and credit facilities (including letters of credit) given to; (b) the value of the institution's holdings of shares and debentures (within the meaning of those terms in section 2 of the Companies Ordinance (Cap. 32) and other debt securities issued by; and (c) the principal amount, multiplied by the factor specified by the Monetary Authority pursuant to subsection (3) for items referred to in Table B of the Third Schedule in relation to the institution where, in respect of that institution, the other party is, that person, company or combination thereof, as the case may be.

(3) The Monetary Authority may, by notice in the Gazette, specify the factor for the purposes of subsection (2) (c), and any such notice may specify different factors for different items referred to in that subsection.

(4) Where- (a) the person referred to in subsection (1) (a) is a subsidiary or holding company of an authorized institution or a subsidiary of such holding company; (b) the holding company referred to in subsection (1) (b) (i) is an authorized institution or a holding company of an authorized institution; or (c) the holding company referred to in subsection (1) (c) is a holding company of an authorized institution, the Monetary Authority may, by notice in writing to the institution, and subject to such conditions as he may think proper to attach thereto in any particular case, specify that subsection (1) (a), (b) (i) or (c), as the case may be, shall not apply for the purpose of determining the financial exposure of that institution and, accordingly, subsection (1) (a), (b) (i) or (c), as the case may be, shall not apply.

(5) Where- (a) an authorized institution is financially exposed to a trustee in respect of 2 or more trusts; and (b) any person, company or combination thereof referred to in subsection (1) (a), (b), (c) or (d) is that trustee, the Monetary Authority may, by notice in writing to the institution, and subject to such conditions as he may think proper to attach thereto in any particular case, specify that the financial exposure of that institution to that person, company or combination thereof, as the case may be, may exceed an amount equivalent to 25% of the capital base of the institution by an amount not more than the amount specified in that notice and, accordingly, such financial exposure of that institution may exceed the first-mentioned amount by an amount not more than the amount specified in that notice.

(6) For the purposes of this section, the financial exposure of an authorized institution shall not include- (a) any financial exposure to other authorized institutions; (b) any financial exposure to the extent to which it is- (i) secured by- (A) a cash deposit; (B) a guarantee; (C) another undertaking which, in the opinion of the Monetary Authority, is similar to a guarantee; or (D) securities issued, or guaranteed, by the central government or the central bank of any Tier 1 country within the meaning of the Third Schedule; or (Added 67 of 1992 s. 6) (ii) covered by a letter of comfort, where such cash deposit, guarantee, other undertaking, securities or letter of comfort, as the case may be, is accepted by the Monetary Authority, and subject to such conditions as he may think proper to attach thereto, either generally or in any particular case; (Amended 67 of 1992 s. 6) (c) any financial exposure acquired by the purchase of bills of exchange or documents of title to goods where the holder of such bills or documents is entitled to payment outside Hong Kong for goods exported from Hong Kong; (d) any advances, loans and credit facilities made against any bills or documents referred to in paragraph (c); (e) any financial exposure to the Government; (f) any financial exposure to any other government, except a government which is, in the opinion of the Monetary Authority, one that should not be accepted for the purposes of this section; (g) any financial exposure to a bank incorporated outside Hong Kong which is not licensed under this Ordinance where any such bank is, in the opinion of the Monetary Authority, adequately supervised by a banking supervisory authority in its place of incorporation; (h) any share capital or debt securities held as security for facilities granted by the institution or, subject to subsection (7), acquired by it in the course of the satisfaction of debts due to it; (i) any financial exposure acquired under an underwriting or subunderwriting contract- (ii) where such financial exposure would, but for this subsection, be financial exposure under subsection (2) (b); (iii) for a period not exceeding 7 working days, or such further period as the Monetary Authority approves in writing, and subject to such conditions as he may think proper to attach thereto in any particular case; (j) any financial exposure acquired under an underwriting or subunderwriting contract where such financial exposure would, but for this subsection, be financial exposure under subsection (2) (c); (k) any indemnity given by the institution to a person to protect that person against any damages which may be incurred by the person as a result of the person registering a transfer of shares where- (i) the instrument by means of which the transfer has been effected, or purports to have been effected, has been provided, or purports to have been provided, by a subsidiary of the institution; (ii) the authenticating signature on the instrument has been imprinted on it by a machine used by the subsidiary to imprint that signature on such instruments; and (iii) that signature was unlawfully so imprinted on that instrument, or any financial guarantee given by the institution to that person in respect of any like indemnity given by that subsidiary to that person; (Amended 67 of 1992 s. 6) (l) any financial exposure to the extent to which it has been written off, or to which specific provision has been made for it, in the books of the institution. (Added 67 of 1992 s. 6) (7) All share capital and debt securities acquired by an authorized institution in the course of the satisfaction of debts due to it shall be disposed of at the earliest suitable opportunity, and in any event not later than 18 months after the acquisition thereof, or within such further period as the Monetary Authority approves in writing, and subject to such conditions as he may think proper to attach there to, in any particular case.

(8) For the purposes of this section- (a) the expression "person" includes any partnership, any public body and any body of persons, corporate or unincorporate; (b) the expression "debt securities" shall mean debt securities as defined in paragraph 1 of the Third Schedule; (c) advances, loans, credit facilities, guarantees or liabilities shall be deemed to be granted to and to be outstanding in relation to any person liable or contingently liable thereon whether as principal debtor, guarantor, or otherwise: Provided that the reference in this paragraph to a guarantor shall not include a person (not being an authorized institution) who guarantees the obligations of another under- (i) a hire purchase agreement, that is to say an agreement for the bailment of goods under which the bailee may buy the goods, or under which the property in the goods will or may pass to the bailee; or (ii) a conditional sale agreement, that is to say an agreement for the sale of goods under which the purchase price or part of it is payable by instalments. and the property in the goods is to remain in the seller (notwithstanding that the buyer is to be in possession of the goods) until such conditions as to payment of instalments or otherwise as may be specified in the agreement are fulfilled; and (d) a partnership of which an authorized institution is a member shall be deemed to be a subsidiary of that institution.

(9) Every director and every manager of an authorized institution which contravenes subsection (1) commits an offence and is liable- (a) on conviction upon indictment to a fine of $ 200,000 and to imprisonment for 2 years and, in the case of a continuing offence, to a further fine of $ 10,000 for every day during which the offence continues; or (b) on summary conviction to a fine of $ 50,000 and to imprisonment for 6 months and, in the case of a continuing offence, to a further fine of $ 5,000 for every day during which the offence continues.
| 1 | 2 | 3 | 4 | 5 | 6 |