Banking Ordinance
# Banking Ordinance

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.

## History

### Banking Ordinance of 1948

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. A Hong Kong dollar $5,000 license fee was required one-time. Afterwards, a bank could theoretically open on zero capital.

### Banking Ordinance of 1964

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.

### Banking Ordinance of 1967

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.

## Hong Kong Association of Banks

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

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.

