(118281) Dd. 391599 1,500M 2/69 Hw,
NOTHING TO BE WRITTEN IN THIS MARGIN
Registry No.
SECURITY CLASSIFICATION
Top Secret.
Secret.
Confidential.
Restricted. Unclassified.
PRIVACY MARKING
..In Confidence
DRAFT Brief
for hi Morten.
Type 1 +
To:-
From
Telephone No. & Ext.
Department
Sterling Agreement
At times of currency uncertainties this (is) the
subject always liable to be raised in Hong Kong where
there is still a residue of ill-feeling as a result of
devaluation.
2.
By an exchange of letters signed September/October
1968 HMG undertook to maintain the Sterling value in
terms of the US dollar of 90% of Hong Kong total
reserves provided Hong Kong maintained a minimum of
99% of her reserves in Sterling.
cassets held in the form of 13. The guarantee does not extend to equities (which
will have appreciated with the devaluation of the pound);
Neither does it cover private holdings. B Hong Kong
has no central bank. The Colonial Government therefore
relies on the three main commercial banks to issue
bank notes and to buy and sell Sterling on request at
official rates. For this reason some of the commercial
banks' balances were, by special arrangement, brought
within the scope of the Agreement.
We did not agree
to guarantee the value of any non-official commercial
bank balances but it was accepted that the Hong Kong
Government should be able to take into official reserves
some part at least of their balances of Sterling. This was to be achieved by means of the Exchange Fund (which
feverides the sterling backma for the Currency).