The banking sector has regained itsstability after a protracted period of difficulty, banking
commissioner Robert Fell said.
    "The banking climate has dramatically changed from a year
ago," he said at a news conference to present his annual report
on the banking sector for 1986.
    "We've got confidence back. We've got profitability back." he
said.
    A three-year shake out in the local banking sector forced
the government to take over three banks and arrange for the
acquisition of four others by the private sector.
    Fell said that in many cases the bank problems stemmed from
management fraud which he linked partly to dramatic swings in
the stock and property markets in the early 1980s.
    "We've got it out of the system now," he said. "Fraud is no
longer a systemic problem."
    But he acknowledged there may still be problems.
    "Deliberate fraud is difficult to detect especially where
collusion and senior management are involved," he said.
"Prudential supervision cannot give complete protection. The
(new banking) ordinance is designed to give a "measure" of
protection."
    Fell said a number of banks want to set up operations in
Hong Kong, adding the government approved three banking
licences this week. He did not give details.
    At the end of 1986, there were 151 licenced banks, 25 of
which were locally incorporated, compared with 143 a year ago.
Another 134 foreign banks had representative offices compared
with 131 a year ago.
    There were 34 licensed deposit-taking companies (DTCs) and
254 registered DTCs at the end of 1986, compared with 35 and
278 respectively a year ago, he said.
    Foreign banks seeking banking licences in Hong Kong must
have assets of 14 billion U.S. Dlrs. But Financial Secretary
Piers Jacobs said yesterday the asset criteria are flexible.
    A high asset threshold has worked in the favour of banks
incorporated in countries with relatively large economies, he
noted.
    "No licences in the last few years have been granted to
banks from any of the smaller countries in the Asia-Pacific
region," he said.
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