Banking Ordinance

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The Banking Ordinance is a set of laws passed by the Legislative Council of Hong Kong to tighten restrictions for opening up or licensing a bank. Prior to the 1964 re-regulations, the government had no way to control bank's monetary effect on the economy. It also had no way of protecting the people utilizing the institutions. Banking was considered a Laissez-faire network, and was also described as "Free Banking" or "Wildcat Banking" filled with much uncertainty.


Banking Ordinance of 1948[edit]

The first law passed. It provided for the licensing of banks, examination of bank books, publication of bank statements and the appointment of an advisory committee.[1] A Hong Kong dollar $5,000 license fee was required one-time. Afterwards, a bank could theoretically open on zero capital.[2]

Banking Ordinance of 1964[edit]

The law was passed on 16 October 1964 and advised by a group of senior officials from the Bank of England. A minimum capital of HKD $5 million and liquidity ratio of 25% and limitation on loans and investments became the new requirements to open a legit institution.[1]

Banking Ordinance of 1967[edit]

The law was passed in response to a banking crisis in which a few banks experienced liquidity problems and 18 acquisitions by larger banks were recorded. The revised law set the new minimum capital to HKD $10 million. A debt moratorium was imposed on new bank licenses.[3]

Hong Kong Association of Banks[edit]

The Hong Kong Association of Banks was established in 1981 as a network tag for banks that follow the ordinance rules.

Banking Ordinance of 1986[edit]

The law is an enhancement to the existing 1967 set. Changes were made to the provisioning of banks, adequacy of capital, control of the management of a bank. It also merged the "Deposit-taking Companies Ordinance" which also required a certain capital before banks can accept deposits.[4]

See also[edit]


  1. ^ a b Jao YC. [2001] (2001). The Asian Financial Crisis and the Ordeal of Hong Kong. Quorum, Greenwood. ISBN 1-56720-447-3
  2. ^ Cato org. "Cato Org." Is Free banking more Prone to Bank Failures. Retrieved on 2007-02-23.
  3. ^ Masuyama, Seiichi. Vandenbrink, Donna. Yue Chia, Siow. [1999] (1999). East Asia's Financial Systems: Evolution & Crisis. Institute of Southeast Asian Studies Publishing. ISBN 981-230-005-8
  4. ^ Roebuck, Derek. [1994] (1994). Law Relating to Banking in Hong Kong. Hong Kong University Press. I SBN 9622093531