THE Governor has been criticised by leading banker and legislator David Li Kwok-po for failing to democratise Hong Kong's banking sector and rid the territory of what he called the " last vestiges of colonialism" in the financial system.

Chris Patten had concentrated on political reform but failed to tackle financial reform and so level the playing field for local banks trying to compete against the monolith of the Hongkong Bank, said Mr Li, chief executive of the Bank of East Asia.

However, Mr Li said the Governor was probably unaware of the need for reform because he had little personal understanding of the issues and relied on his advisers, most of whom have a vested interest in maintaining the old system.

" Most of his advisers are basically the people who want to perpetuate this colonial system. Just look at who is on the Executive Council. There are not too many independent voices," Mr Li said in an interview with the South China Morning Post.

He claimed Mr Patten's advisers disguised their vested interests by saying it was necessary to preserve the system in order to maintain stability and prosperity and not rock the boat.

" But it is not a question of not rocking the boat," Mr Li said, " it is a question of preserving their own profitability.

"What Chris Patten needs to do is to drum into these people that they are no longer a colonial power."

Mr Li, a director of South China Morning Post (Holdings) Ltd. was particularly critical of the Hong Kong Monetary Authority (HKMA), a body he singled out for perpetuating the existing system and failing to support local institutions.

The HKMA currently refuses to place funds with local banks because they are not rated by Moody's Investors Services or Standard & Poor's. Only note issuing banks are currently rated.

Mr Li said the HKMA had more than enough information to rate local banks itself and should not rely on outside agencies, which are not as well informed, to determine who was and who was not eligible for funds.

" I thought that all monetary authorities would support their own institutions. Instead the HKMA is placing funds outside Hong Kong with overseas institutions. I'm not against that but I do think a certain amount of Hong Kong money should be placed with local banks," he said.

The HKMA's deputy chief executive, Andrew Sheng, defended the body's insistence on using international agencies In rating banks, saying Hong Kong was an international financial centre and as such the HKMA was required to use " objective international standards" .

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