Henry C.K. Liu
DANIEL.DAVIES at flemings.com wrote:
> What with this and the inspired intervention in the stock market, the
> HKMA's beginning to get my vote for Central Bank of the Year. The scheme
> looks similar to the London Rules, but with a much heavier threat if the
> banks don't play ball.
>
> dd
>
> HONG KONG, April 29 (LPC) - Hong Kong Monetary Authority Deputy Chief
> Executive David Carse said
> on Thursday he could not rule out using statutory powers on banks who
> stand in the way of a successful
> debt workout if "moral suasion" proved insufficient.
>
> He said he found it difficult to envisage circumstances where the HKMA
> would use its more formal powers,
> but that if a particular workout was of great importance "I can't rule it
> out."
>
> "We would need to look at whether the issue was big enough in the public
> interest to justify the use of our
> formal powers," Carse said. "We haven't used our formal powers up to now --
> it hasn't been our practice to
> do so. We rely on moral suasion and we will continue to rely on moral
> suasion."
>
> The number of compulsory winding-up orders in Hong Kong has leapt to 763
> in the 1998/99 financial
> year, an all time high. The average in the previous five years was 480.
>
> Carse, speaking at a business luncheon, said that since the introduction
> of the so-called "Hong Kong
> Rules" last April -- the Hong Kong Association of Banks' guidelines on how
> banks should handle debt workouts
> -- the HKMA had been involved in 10 cases to act as an "honest broker."
>
> Typically the authority intervened when a small minority of banks,
> sometimes only one, refused to sign a
> restructuring agreement or threatened action that would have caused the
> workout to collapse, he said.
>
> In those circumstances, the HKMA would expect the recalcitrant bank or
> banks to come up with a very
> persuasive case to justify why they did not go along with the majority
> view.
>
> In 1998, domestic lending in Hong Kong fell by HK$122 billion of which
> over 60 percent was the result of
> the withdrawal of Japanese and contintental European banks, said Carse.
>
> Carse noted that as foreign banks have sought to cut their exposure to
> Hong Kong, their commitment to
> pursue successful workouts may have been undermined.
>
> "Clearly if banks are reducing their commitment they may feel that they
> have less responsibility in relation
> to workouts," Carse said. But he noted that foreign banks should cooperate
> in workouts because it was in their own best interests.
> "The principle of a workout is that the bank should do better than they
> would do in a liquidation," Carse said.
> "Otherwise there is no point in the banks participating and you might as
> well throw in the towel."
>
> "The banking system can only work effectively if there is an effective
> means of restructuring debt," Carse
> added. "It is not however our practice to use our powers under the Banking
> Ordinance to force banks to take
> decisions on workouts which are against their commercial judgement."
>
> ((Paul Caine, Hong Kong Newsroom +852 2568-6773, Fax +852 2526-1400
> hongkong.newsroom at reuters.com))
>
> For related news, double click on one of the following codes:
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>
> Thursday, 29 April 1999 09:50:23
> RTRS [nHKG66997]
>
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