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XCS(73)9
3
In order to qualify for the benefits of this unilateral undertaking the Hong Kong Government must meet the following conditions:
(a)
(b)
(c)
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that the minimum proportion of total official yeserves held in sterling (M, S, P.) is maintained throughout the period at 89% (*). (And note that if T.O.E.R. and O.S. R. fall over the period the guarantee will apply to the lower of the O.S.R. balances ruling at the beginning or end of the period);
that the Bank of England is notified of actual eligible sterling balances held on 24th September 1973 and 29th March 1974 (for the purpose of calculating the amount due under the guarantee, if any);
that, notwithstanding the phrase "throughout the period" mentioned in paragraph 3(b) above, the Bank of England is notified of the Colony's total official external reserves and official sterling reserves as at the end of October and each calendar month thereafter (for the purpose of establishing that the M.S. P. condition is being observed),
Honourable Members will recall that the Financial Secretary first mentioned the importance of early talks on the future of the Sterling Guarantee Agreements after September 1973 when he visited London in April 1972 to clarify the terms of the reduction in Hong Kong's M.S.P. from 99% to 89% with effect from 25th September 1971 (when the three year Sterling Guarantee Agreements were extended for a further two years). He raised the subject again in talks with British officials who visited Hong Kong in July 1972 after the floating of sterling and yet again when he visited London in September 1972. At these various talks and in correspondence, it was repeatedly represented to the British Government that, if the Sterling Guarantee Agreements could not be renegotiated well before their expiry both the Hong Kong Government, and the banks would become increasingly worried about the prospect of having a large
D
Footnote
(*) Total official external reserves (T.O.E.R.), official sterling reserves (J,S,R.) and the minimum sterling proportion (M.S.P.) are defined in Annex D.
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