Tuesday, June 21, 2005

Where do you prefer to see the banks, at the top of the Pyramid or at the bottom?

Banking industry, comparatively, has more stringent control in developed countries. These regulatory measures if properly enforced will enable the Government and the general public to see how Banks are operated. E.g. in Hong Kong banks are not allowed (or discouraged?) to have major shareholding in corporations other than those directly related to banking or finance industries. Banks will be allowed to hold shares for a reasonable period if shares were acquired due to corporate debt restructuring but shares should be deposed of eventually. Whereas if the Bank is at the bottom of the pyramid expropriation is easy by related-party lending since the Manager of the Bank is controlled by controlling shareholders.

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