CYPHER/CAT A
CONFIDENTIAL
PRIORITY FOREIGN AND COMMONWEALTH OFFICE
TELNO 498
Sberling File.
(26
TO HONG KONG
31 JULY 1969
(MF)
CONFIDENTIAL
ADDRESSED TO HONG KONG TELNO 490 OF 31 JULY REPEATED FOR INFORMATION TO KUALA LUMPUR (FOR FOGARTY)
STERLING AGREEMENT: YOUR TELEGRAM NO.553
WE HAVE NOW CONSIDERED COWPERTHWAITE'S LETTER OF 13 JUNE TO O'BRIEN
IN THE LIGHT OF YOUR TELEGRAM UNDER REFERENCE.
2. WE ARE IN GENERAL PREPARED TO ACCEPT THE FORM OF THE PROPOSED ARRANGEMENT, WHEREBY A PROPORTION OF THE STERLING ASSETS OF THE COMMERCIAL BANKS WILL BE DESIGNATED AS QUOTE HELD FOR THE ACCOUNT OF THE EXCHANGE FUND UNQUOTE. THERE ARE, HOWEVER, A NUMBER OF POINTS ON WHICH WE SHOULD LIKE TO SEE SOME TIGHTENING.
3. FIRST, WHATEVER PROPORTION OF THE COMMERCIAL BANKS' HOLDINGS IT IS EVENTUALLY AGEED TO DESIGNATE, WE SHOULD REQUIRE A FIRM UNDERTAKING THAT AN AGREED MINIMUM OF THE TOTAL STERLING ASSETS SUBJECT TO GUARANTEE WILL AT ALL TIMES BE HELD DIRECTLY BY OR FOR THE.
ACCOUNT OF OFFICIAL INSTITUTIONS. WE REGARD THE TERMS OF PARAGRAPH
6 OF COWPERTHWAITE'S LETTER, REFERRING TO AN UNDERTAKING QUOTE
TO ENDEAVOUR TO ENSURE UNQUOTE, AS NOT FIRM ENOUGH.
4. SECONDLY, WE REGARD IT AS IMPORTANT TO HAVE MONTHLY REPORTS RELATING TO THE DESIGNATED STERLING ASSETS, NOT FROM THE BANKS IN HONG KONG (AS PARAGRAPH 3 OF YOUR TELEGRAM UNDER REFERENCE SEEMS TO IMPLY) BUT FROM THE BANKS IN LONDON WITH WHICH THE FUNDS
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RECEIVED IN REGISTRY No.51
-5 AUG 1969
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