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5. PARAGRAPH 10 OF YOUR TELEGRAM UNDER REFERENCE REFERS TO THE IMPLICATIONS FOR MINIMUM STERLING HOLDINGS OF A FALL IN THE PRICE OF GILTS. THE TERMS OF THE UNILATERAL OFFER ARE, HOWEVER, NO DIFFERENT IN THIS RESPECT FROM THOSE OF THE PREVIOUS AGREEMENTS, AND INVOLVE ACCEPTANCE ON OUR PART OF THE RESULTS OF YOUR STATUTORY ARRANGEMENTS FOR VALUATION FOR CALCULATION BOTH OF MSP AND OF AMOUNTS PAYABLE IF THE GUARANTEE IS IMPLEMENTED, IT SEEMS TO US REAGOIAILE THAT YOU SHOULD SIMILARLY ACCEPT THE CONSEQUENCES OF THESE ARRANGEMENTS. WHILE THE TERMS OF THE UNILATERAL DECLARATION, TAKEN IN CONJUNCTION WITH YOUR STATUTORY BASIS OF VALUATION, MAY REQUIRE PURCHASES IF A NEW BOOK VALUATION REFLECTS A FALL IN THE PRICE OF SECURITIES, THEY MAY, SYMMETRICALLY, PERMIT SALES IF THE PRICE OF SECURITIES RISES, WE WOULD SEE DIFFICULTY IN ANY OTHER APPROACH.
6.
ON PRESENTATIONAL ASPECTS, IT IS MOST IMPORTANT THAT NEWS OF THESE ARRANGEMENTS SHOULD NOT REACH OTHER PARTICIPANTS IN THE CUARANTEE ARRANGEMENT IN A WAY THAT CAUSES THEM TO THINK THAT HONG
KONG HAS BEEN SINGLED OUT FOR SPECIALLY FAVOURABLE TREATMENT. WE KNOW THAT YOU APPRECIATE THIS AND HOPE THAT YOU WILL BE ABLE TO IMPRESS THE POINT ON THE EXECUTIVE COUNCIL. THE BEST OUTCOME
WOULD OF COURSE BE THAT THERE SHOULD BE NO PUBLICITY, BUT IF OR WHEN QUESTIONS COME UP WE SUGGEST THAT THE LINE TO TAKE IS THAT DISCUSSIONS BETWEEN HMG AND THE HONG KONG AUTHORITIES HAVE PRODUCED A RESULT THAT IS SATISFACTORY TO BOTH SIDES, AND THAT HONG KONG IS PARTICIPATING IN THE ARRANGEMENT AND ENJOYS THE GUARANTEE IN
RESPECT OF OFFICIAL STERLING HOLDINGS.
7. THE RE-PURSE TO QUESTIONS ABOUT THE POSITION OF THE
COMMERCIAL BANKS MIGHT BE THAT THE PREVIOUS AGREEMENTS WITH HONG KONG WERE ENTIRELY SPECIAL IN EXTENDING TO COMMERCIAL BANK HOLDINGS. THE EXCLUSION OF THE COMMERCIAL BANKS IN THE NEW ARRANGEMENT BRINGS THE POSITION OF HONG KONG INTO LINE WITH THAT OF OTHER HOLDERS AND REFLECTS THE FACT THAT COMMERCIAL BANK
STERLING HOLDINGS ARE NO LONGER JUDGED TO BE SUFFICIENT TO
MARRANT THEIR INCLUSION. WE UNDERSTAND THAT ALTHOUGH HONG
KONG'S FORMER MSP OF 89 PER CENT WAS MORE OF LESS PUBLIC KNOWLEDGE;
THE ACTUAL LEVEL OF STERLING HOLDINGS IS NOT PUBLISHED AND WE SUGGEST
THAT IS SHOULD NOT BE DISCLOSED NOW, IT COULD BE INDICATED IN
RESPONSE TO QUESTIONS THAT HONG KONG'S PARTICIPATION IS BASED
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