致謝詞

It is a very great disappointment to me that I have not been able personally to receive my Honorary Degree today. It is indeed most generous of the University of Hong Kong to allow me to receive it in absentia.

I must further apologise to this distinguished gathering for the fact that in spite of my inability to attend they still have to listen to the speech I was going to make and which the Vice-Chancellor has kindly agreed to read for me. Many will no doubt think that he might have done better to write it as well!

Those people who have been kind enough to congratulate me on the honour I have received have remarked that in view of my academic prowess, or rather my lack of it, an Honorary Degree was the only Degree to which I was likely to aspire. I cannot deny this and indeed I has always imagined that such degrees were awarded in the main to those who would be unable to obtain one in the normal way.

However, when I learnt that my fellow graduands today were accomplished academics in their own right I realised this was not entirely correct. It is a single privilege to be asked to speak on their behalf as well as my own.

One thing I have been spared is to listen to the Public Orator's opinion of me. Perhaps it is audacious of me to hope that he will have been able to find something nice to say while charitably overlooking my deficiencies; however it is on that immodest presumption that I say thank you to him.

I was told that I might speak on any subject I wished provided I kept within the bounds of decency and the laws of defamation. I have thought it wise to say something on banking not only because it is a subject on which I am supposed to know a little but also in the hope that even in this erudite audience many will know rather less than I do.

This puts me in mind of the story of the wife who was seeking a brain-transplant for her husband. The surgeon went through the list of brains available with the price tag of each. A doctor's cost so much per gram, an architect's a little more and so on. The wife expressed some concern at the prices quoted and asked the cost of a banker's brain. Well, replied the surgeon, if you can't afford those I have mentioned you certainly won't be able to afford the brain of a banker. Have you ever stopped to think how many bankers it takes to make a full gram of brains?

For someone who has spent the past thirty-five years in banking, it is appropriate that I should devote the greater part of my address to the massive, paradoxical and ever-changing industry in which I work.

In so doing I must therefore ask the forbearance of my fellow graduands, whose qualifications for being honoured today lie in so many diverse fields.

I propose to address some of the currently widespread questions about the banking industry, and venture some thoughts on its future. But let me first draw attention, within this setting of Hong Kong University, to the special relationship this cultural bridge between China and Europe has with the origins of the modern banking industry.

I mentioned that banking is paradoxical, and the oldest paradox on which the industry rests is that its one visible product - money, in the universally familiar form of paper money - isn't intrinsically worth anything.

Paper money was originally a Chinese invention, in the latter part of the tenth century. It took another 700 years before the first printed banknotes appeared in Western Europe. Public acceptance of such paper money depends on a high degree of cultural sophistication in terms of trust and confidence; without it, we would have been unable to progress beyond the primitive state of commodity money - effectively barter - and banking, as you and I know it, would be impossible.

So, if the Chinese contribution to the banking industry of the present day has been the paradox of money which has almost no intrinsic value, its Western counterpart is the paradox of the bank deposit which is not really there.

For that major milestone the world had to wait another 500 years, until the European Renaissance. Then there emerged for the first time the banker - the forerunner of all the major bankers in the world today - who could be relied upon totally even when re-lending deposits from one customer to borrowers elsewhere.

Lest we take too much for granted an achievement which has many millennia in the making, let me point to two consequences of it of significance today - one fairly temporary, the other far less so.

Among the first borrowers found queueing at the tills of Lombardy's Renaissance bankers were the monarchies of Western Europe. The first major bad debts - now for the first time a problem for the banker rather than his depositor - were not too far behind.

Lending to monarchies, in fact, quickly proved to be as risky as lending to virtually anyone else: what we today call "sovereign risk" was discovered at the dawn of modern banking. Perhaps today's commentators, who seem convinced that "sovereign risk" did not exist until the early 1980s debt crisis triggered by such countries as Poland, Mexico and Argentina, would do well to remind themselves of that fact from time to time.

Fears that the banking system is in danger of imminent collapse have been around for as long as the banking system itself. In the past few decades we have seen energy crises, property crises, commodity crises, and stock market crises - each one with its attendant Jeremiahs confidently predicting the end of the world as we know it. There were many before that. The end of the world has not happened yet, nor do I anticipate for one moment that the latest debt problems will precipitate it.

What will undoubtedly happen is a further review and refinement of the ways banks are regulated, both internally and externally. In turn, one of the consequences of that may be an acceleration in the trend towards larger and fewer banks in the world.

That leads me to the second, and longer term consequence I wish to draw, from peering into the origins of our industry. The strength and success of the world's banking industry has always been closely associated with the most advanced and subtly balanced systems of government and law, culture and education, commercial wisdom and perception.

In this distinguished setting, we are perhaps entitled to draw pride from the fact that the greatest three banking centres on earth - London, New York and Hong Kong - are all English-speaking, and are all founded on closely-related cultural values and legal structures.

It is, I suspect, an eternal truth of banking and finance that the greatest concentrations of power in the industry will invariably gravitate to the centres with the most comprehending and perceptive regulatory systems. There are many other countries which would like a powerful banking centre of their own - just as they want their own airline, their own oil refinery, their own national shipping line.

Those they can have: but what such countries cannot have merely for the asking is their own powerful banking industry despite the unending pleas of the so-called Third World. Strong though the industry is in the right hands, it withers and collapses in the hands of any government which seeks to borrow too much, or isolate it from the truly international financial markets, or demand that it lends according to political rather than commercial criteria. In short the deadening hand of bureaucracy is as stifling today as when Adam Smith perceived it.

Most rapidly of all, a competitive banking industry collapses anywhere that the regulatory system, the government and the civil service, admit corruption as a normal way of life. In such places, the most that can ever be achieved is the carefully-isolated branch of a bank whose centre of power lies elsewhere.

The vulnerability of the financial system to such interference is often overlooked: I trust it will not be overlooked by those, for example, planning the future of this territory.

In the past two decades we have seen massive changes in the size of banking corporations which lead the financial industry - a process in which I pleased to be able to say that The Hongkong and Shanghai Banking Corporation has been as prominent as any.

In part, that growth has been a response to the problems brought by the growing scale of risk; you simply need a bigger corporation to accommodate them safely.

In part, it has been brought about by changes in the profession of management - and the greatest prizes in banking still go to those who can find ways of managing people, risk, assets and communications faster than anyone else.

In part, the change has been a straightforward response to the demands of our customers - themselves, in many cases, rapidly growing multinational corporations.

For all the complex activities which make modern banking appear so impenetrable, there have until now been variants on the four basic things which are all that any bank can do with money:

we can receive it, and pay it

we can hold it as deposits and pay interest

we can lend it

we can move it or convert it into other currencies.

For many banks, and particularly in the United States, the current revolution in information technology has opened up so many possibilities in the way banking could develop that the industry is being forced back on such fundamental reassessment of its own purpose.

For some years, the finance directors of international companies have been able to connect a desk-top terminal in their own office with their corporations' bank accounts all over the world and examine balances, recent debits and credits, and even give instructions to move money from one account to another. They are not far short of doing their own banking for themselves.

Now the same technology is spreading into the home: in the United States there are numerous experiments in which the domestic telephone, a home computer and the family television set combine to give customers instant home banking. For the immediate future, it does look as if the resultant home banking systems are a solution in search of a problem. In the longer term, however, as cable television systems are developed into comprehensive two-way information systems serving a large proportion of households development down that route looks inevitable for the banking industry.

Moreover, the corporations which are beginning to offer these home banking services are not only banks; they can be major retail chains with account business into many millions of households; they can be conventional information organisations, including post office and telephone companies, anxious not to see their market in person-to-person communications taken away from them; and they can be organisations such as television companies, moving from their original broadcasting into the newer field of "narrowcasting".

Such changes, ushered in by the ever-cheaper microchip, are starting to affect the banking industry very rapidly indeed. The constant pressure from the kind of non-bank organisations I have listed - retail chains, post and telecommunication authorities, television programme producers and distributors - pose a number of headaches for the regulatory authorities.

At the same time, the regulators are faced with a complementary pressure from banks to retaliate by moving into fresh market territory themselves. Just in the past month or so, we have witnessed the major British banks buy their way into the London Stock Exchange in a very large way, taking big slices of both stockbrokers and stockjobbers. It would have been unheard of even five years ago; increasingly major banks are entering such diverse fields as insurance, home mortgages and the like. The fashionable name for the business we are rapidly moving into is no longer banking, but financial services, or as some call them, financial supermarkets.

Let me, in conclusion, try to sum up with a few predictions for the banking industry, perhaps to the turn of the twentieth century. The greatest centres of power and advancement in banking will continue, as they always have done, to move towards the countries whose administrations are most knowledgably self-disciplined in the way they treat industry. That delicate balance lies at the heart of the relationship between politics, economics and social mores.

The stakes will grow larger. The combination of technology ushering in new possibilities for communication, and new methods of operation within banks, and the simultaneous strengthening of both measurement and size of risk, seem set to ensure that banks will grow larger. In a world which is almost certainly over-banked, that means fewer of them.

For the customer, the role of those banks will change as we see the progressive emergence of the widely-based financial services corporation.

That takes us, perhaps, to around the turn of the century. What lies beyond is as imperceptible as the shape of society itself.

Citation written and delivered by Professor Francis Charles Timothy Moore, the Public Orator.