(226
DRAFT TELEGRAM TO GOVERNOR HONG KONG
Your telegram 1361. Sterling Guarantee.
We are ready to accept that Hong Kong's minimum sterling holding
should be calculated on a market basis. You will no doubt sent
all advices on that basis. Any implementation payment will also
of course be calculated on the basis of market valuation of your
holdings.
As a special gesture, we are also prepared to accept that your minimum sterling proportion should be 78%, that is the figure corresponding to your actual holdings on 26 September based on
It is however most important that you should
market valuation.
not reveal that the MSP has been revised to take account of the
change in the basis of valuation between the present arrangement
and the former agreement. In explaining that a new MSP has been
decided upon to replace the former MSP of 89%, you should keep to
the line set out in paragraph 7 of our telegram 1133 namely that Hong Kong's participation is based on the reserve position at the expiry of the former agreement but with adjustments made to take
account of the non-participation of the banks in the new arrange-
ments.
w/227;