The Association was set up in September 1981. It was in response to a need which the then Financial Secretary Sir Philip Haddon-Cave expressed at his 1980 Budget Speech (para, 319) to talk to the then around 300 merchant banks and deposit-taking companies as a whole. At the time our members were under a separate Deposit-taking Companies Ordinance and government felt the need to revamp the banking structure. This was in turn due more to our quiet success rather than the media high lighted cases of failure. As a group these institutions at one time absorbed over 37% of total deposits from the public. The history of the Association has since been one of representing all of the authorized institutions other than the fully licensed banks and one of consulting with the authority - the Hong Kong Monetary Authority (HKMA) and its precursor the Office of the Commissioner of Banking - on the regulatory regime for authorized institutions (Als).

Our Membership consists of institutions from the other two tiers in a three-tier structure of authorised institutions. Participation rate begins with slightly under 90% in the early years with virtual full participation in recently years. Our member institutions - which are nowadays called restricted licence banks (RLBs) and deposit-taking companies (DTCs) - functions the same way as banks. They are being supervised by the same authority of the HKMA using the same criteria and under the same Banking Ordinance, except for the few specified limitations stipulated in the said Ordinance. In return for these restrictions (which are on size and maturity of deposits from customers and being debarred from checking and savings accounts, etc), RLBs and DTCs can start with a smaller paid-up capital, although the larger ones of our members could be substantial in assets terms compared with the smaller local banks. At one stage, a transition to a two-tier structure is planned by the HKMA and the idea is still entertained. By then there would be a consolidating exercise which both the industry and the authorities cooperate to ensure a smooth upgrading of current DTCs to join the class which the current RLBs will migrate into.

Currently, there are 29 RLBs and 30 DTCs. Our members encompass a wide diversity of institutions and business activities that maximizes on the various niche markets. On the whole their being niche focussed contributes to their flexibility in adaption to a changing business environment and in maximization of opportunities. These translates into better service for their clients, both in quality and cost terms. In 1990, the Authority's restructuring of the then Licensed DTCs (commonly known as merchant banks) to become Restricted Licence Banks revitalised this intermediate category of authorisation as an attractive option for many foreign institutions who are not interested in offering checking accounts and passbook savings products in Hong Kong. Consequently their numbers increased from 36 in 1989 to 63 at end 1994. Most are leading international merchant and investment banking institutions. Hong Kong subsidiaries of major foreign banks are well represented. Also included are specialist institutions operating in the custodian service, hire purchase, funds management, stock financing, credit card, leasing, and trade finance sectors, etc.

Our deposit-taking company members cover an even broader range of activities. With some notable exceptions, few are involved just in the business of taking customer deposits. With the benefit of bank parentage and assured sources of funding, a large number are making an important contribution to Hong Kongs position as a leading Asian centre for debt origination, through arranging capital markets issues and making syndicated loans. In this respect foreign banks often find that having a locally incorporated and authorised subsidiary can prove very useful for their lending and securities related business. Leasing, consumer finance and credit card, and stock financing companies are well represented among deposit-taking institutions. There are also significant trade finance operations. In recent years, even the HKMA find it convenient to make use of features of a three tier system by authorising stored value card vehicles as DTCs. This is another clear demonstration of the need for niche market entities.

Being flexible and well balanced is not only a characteristics of our members, but also the Executive Committee composition of the Association. While we do not formally stipulated that so many Executive Committee members should be from which countries of origin, we have always maintained an adequate diversity of institutions from different countries, of different specializations of businesses, and different sizes. At one stage, our Executive Committee comprises of institutions and executives from 10 different countries.

In conjunction with the Hong Kong Association of Banks (HKAB), we are one of two organisations whom the authorities regularly consult on prospective changes to the legal and regulatory environment applied to the banking and finance industry. This arrangement is written into the Banking Ordinance. Arising naturally from consultations between these three parties of the HKMA, HKAB, and ourselves, we have assumed the role of jointly developing industry wide codes of practice. "The Code of Banking Practice" is one example that attracted much media attention.

Because our members are those who maximise the potential of niche markets and new opportunities, and because we have no special privileges in need of rear guard actions to protect, our Association's stance is more close to the position of advocates of the free market and those with a general concern for the development of our economy (and indeed community) as a whole. At the end of 1998 the HKMA commissioned a report on how the banking industry is to be upgraded to face challenges of the future and to enhance Hong Kong's position as an international financial centre - "Hong Kong Banking Into the New Millennium" (Millennium Report). Our stance could conveniently be explained in terms of positions we take on issues raised in that report. We have consistently taken up positions welcomed by the community as a whole, such as dissolution of interest rate cartel, advocacy for deposit insurance, central credit registry, relaxing barriers for foreign institutions to enter the market, level playing field for all, etc.

Our past lobbying achievements include participation in the government Special Finance Scheme for small and medium size enterprises, which translates into wider choice for businesses in Hong Kong. Another case is our persuasion for wider acceptance among shipping companies and utility companies of guarantees issued by RLBs and DTCs. This translated directly into more cost effective bank charges for many other enterprises. In the late 1990s to 2002, we have once persuaded the HKMA to accept RLBs into the real time gross settlement system and the discount window. (Unfortunately, this acceptance was not materialised due to insufficient number of members who pledged to join. This, in turn, was due to anticipated running cost of participating.)

It can readily be appreciated that our industry thrives on providing financial support for the rest of the economy. Thus, our concern is and should always be going beyond the immediate benefit for members of our industry. The well being of our members and that of our economy is at one. Thus, we support other trades in their lobbying efforts. In additon, we are members of several inter-institutions bodies that set industry standards and solve industry wide problems:- i) Code of Banking Practice Committee ; ii) Commercial Credit Reference Agency (CCRA); and iii) Consumer Credit Forum.

In the spirit of setting up a background for future cooperation, we would like to be in touch with many relevant bodies in ways formal and informal.