LegCo Paper No. CB(1) 265/96-97(01)
Paper for the Bills Committee
Banking (Amendment) Bill 1996
Proposed Regulatory Framework for Money Brokers
In response to comments made by Members, this paper -
- clarifies whether section 121 of the Banking Ordinance allows the MA to disclose prudential information about approved money brokers to relevant overseas authorities;
- explains whether it is necessary to declare "derivatives" to be an instrument for the purposes of the definition of "money broker"; and
- explains the procedures involved in any amendment to the capital requirement for money brokers.
Disclosure of information
2. The HKMA has sought legal advice which confirms that the window allowing the MA to disclose information to relevant supervisors under section 121 of the Banking Ordinance is not restricted to information about authorized institutions. Provided that the overseas supervisor discharges functions similar to those of the MA in relation to money brokers, information relating to them may be disclosed.
Declaration of "derivatives" to be an instrument
3. The HKMA has confirmed with the Hong Kong Foreign Exchange and Deposit Brokers Association that the transactions set out in paragraphs (a)(i)(A) and (B) of the definition of "money brokers", i.e. the making of deposits and purchase and sale of currencies, are already adequate in defining the core business of money brokers. Some money brokers may also be engaged in derivative business, but their business will still involve forex and deposit broking, which will put them within the ambit of the definition. The HKMA therefore considers that there is no need to declare "derivatives" to be an instrument for the purpose of the definition of "money brokers".
Amendment of the capital requirement
4. The capital requirement for approval as money broker is specified in item 5 of the Eleventh Schedule of the Bill. The minimum paid-up capital stipulated in that item is HK$5,000,000 or an equivalent amount in any other approved currency. Members have raised concern on whether the MA may change this capital requirement without consulting the Legislative Council.
5. Under clause 21 of the Banking (Amendment) Bill 1996, the Financial Secretary will be empowered to amend the Eleventh Schedule by notice in the Gazette. It should however be noted that such notice is subsidiary legislation and is subject to the "negative vetting" procedures by the Legislative Council. That is, members will be able to vet any proposal to amend the capital requirement as stipulated in item 5 of the Eleventh Schedule.
Hong Kong Monetary Authority
Last Updated on 15 December 1998