Guideline 1.2: Authorization - Three-tier Banking System

Guideline No.: 1.2 Our Ref. : CB/POL/5/19 22 January 1990 To : The Chief Executive All Authorized Institutions Dear Sir, Restricted licence banks In March 1989, I wrote to you outlining proposed changes to the three-tier system which had been approved by the Executive Council. The Banking (Amendment)(No. 1) Ordinance 1990 was enacted by the Legislative Council on 17 January 1990, and will come into operation on 1 February 1990. This gives legal effect to the proposed changes. The essential feature of the changes is that the present categories of licensed deposit-taking company and registered deposit-taking company are to be replaced by two new authorizations - restricted licence bank (rlb) and deposit-taking company (dtc). All existing licensed dtcs and registered dtcs will be grandfathered as rlbs and dtcs. Locally incorporated banks and licensed dtcs authorised before 1 February 1990 will have until 10 March 1991 to meet the new paid-up share capital requirements of $150mn and $100mn respectively: locally incorporated registered dtcs authorised before 10 March 1989 will have until the same date to meet their new paid-up share capital requirement of $25mn. Applications for a restricted banking licence can now be made by overseas banks and financial institutions and deposit-taking institutions which meet the necessary criteria. Those wishing to do so should contact this office for advice. Judging from the enquiries we have received, it would seem useful If I take this opportunity to clarify the use of banking names and business descriptions by an rlb. An rlb operating as a branch of an overseas bank may trade under the bank's corporate name. Where that name includes the word “bank” (or its derivatives) in any language, it must be used in Hong Kong in immediate conjunction with the phrase "Restricted Licence Bank” in equal prominence : for example, "ABC Bank , Restricted Licence Bank”. If the overseas bank does not have the word "bank" in its corporate name, the rlb may trade in Hong Kong under that name without being qualified by the words "Restricted Licence Bank”.

An rlb operating as a Hong Kong incorporated company would not be allowed to incorporate under, or use, a banking name. Thus, a local subsidiary of ABC Bank could only trade under the name of ABC (Asia) Ltd., for example. An rlb would be able to use the terms "restricted licence bank”, “merchant bank", "investment bank", or "wholesale bank" in describing its business, for example, in promotional material or advertisements. Descriptions such as "retail bank" or “commercial bank" will not be allowed. Finally, I would like to emphasise that there is no deadline for the submission of applications. There should, therefore, be no need for institutions to apply for the establishment of an rlb ahead of their own commercial plans. Yours faithfully,

(A.W. Nicolle) Commissioner of Banking c.c. Local Representative Offices