ON a rainy day in Central, a line of people was queuing for a bus. As the rain became heavier, the queue moved to shelter under the canopy of a bank. Within no time, the city was abuzz with rumours of a run on the bank.
It has been incidents such as this which have reinforced the argument for limited information disclosure by Hong Kong banks in the mid-1980s, and allowed them to maintain inner reserves as a cushion against bad times.
In today's increasingly open regulatory environment, it is the possible recurrence of unfounded rumours eroding public confidence in a bank that lends strength to the disclosure exemption enjoyed by Hong Kong banks.
The battle between higher transparency and due protection accorded to banks against unsophisticated depositors who are easily swayed by rumours is now being revisited with new impetus.
A working group on financial disclosure, formed under the auspices of the Securities and Futures Commission, suggests the Government should re-examine exemptions given to banks.
Under the 10th schedule of the Companies Ordinance, banks are exempted from revealing inner reserves, tax charges, bad and doubtful debt provisions, income and loss from investments, and valuation of fixed assets.