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arrangements could be worked out to allow us to remove the limit of
₫ HK 3,000 million which we have sought to impose; but the weakness
of checks could also lead to abuse within the limit to which we have
already agreed.
3. In these circumstances, the Bank feel strongly, and I share their
view, that we ought to express to Sir J. Cowperthwaite some of our
concern, and in particular that we should make it known that we may
require returns from the London depositaries of the commercial banks
to ensure that the proper amount of sterling is indeed being held in
London; we should also ask that an obligation be placed on the
commercial banks in Hong Kong to provide us with advice of each month
most banks are sending advices to us, but the coverage is not complete
and there is no requirement that they should be made in the letter of
29th January. The second point is provided for in the Secret Dispatch
dealing with the implementation of the agreement; the first is not
explicitly dealt with there, and we may well find opposition from
Sir J. Cowperthwaite. But at the time of implementation it would be
a very important safeguard for us, for otherwise we could find our-
selves paying on sterling which did not exist, while the knowledge
that we were going to make such a check at very least at a time of
implementation would also cause the Hong Kong Government to be more
concerned about the day-to-day policing of the arrangements, because,
otherwise, they could find themselves let down by the inefficiency of
dishonesty of the commercial banks and have actual sterling holdings
below m.8.D.
44. The Bank would also like to criticise Sir J. Cowperthwaite for
having included the non-authorised banks in the arrangements. These
have no obligation to hold sterling and can cover forward on the free
market; they are much less deserving of the guarantee than the
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/authorised