PRIORITY
CYPHER/CAT A
FM FCO 191020Z
CONFIDENTIAL
ORWELL
CONFIDENTIAL
RECEIVED IN REGISTRY No. 51
11 APR 1974
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TO PRIORITY HONG KONG TEL NO 357 OF 10 APRIL. 295
YOUR TELS NOS 396 AND 406: STERLING GUARANTEE.
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1. WE ARE SORRY TO CEE FROM THE RECENT EXCHANCE OF TELEGRAMS THAT
THE SIX MONTH ARRANGEMENT SHOULD SEEMINGLY HAVE COME TO AN END ON
A NOTE OF DISCORD.
2. WE DO FIND IT A LITTLE DIFFICULT TO SEE HOW THE RELEVANT
PROVISION LENDS ITSELF TO YOUR INTERPRETATION. YOU APPEAR TO
REGARD ANY BREACH RESULTING FROM A FALL IN THE PRICE OF GILTS AS
ACCIDENTAL BY DEFINITION EVEN IF IT COULD HAVE BEEN FORESEEN AND
AVOIDED EITHER BY THE MAINTENANCE OF A MARGIN ABOVE MSP/MSH OR
PURHCASES IN ADVANCE. WE REGARD AN ACCIDENTAL BREACH AS ONE RESULTING FROM CIRCUMSTANCES WHICH COULD NOT HAVE BEEN REASONABLY
FORESEEN OR PRUDENTLY PROVIDED AGAINST, SUCH AS A SUBSTANTIAL FALL
IN GILT PRICES IN THE LAST DAYS OF THE MONTH. NEVERTHELESS WE DO
NOT, OF COURSE, DOUBT YOUR GOOD FAITH AND WE APPRECIATE THE CIRCUMSTANCES IN WHICH YOU HAVE HAD TO OPERATE AND THAT
(UNJUSTIFIED) CRITICIS MAY WELL ARISE LOCALLY WHEN YOUR TOPPING-UP
PRUCHASES BECOME KNOWL.
3. ALTHOUGH YOU INDICATE RIGHTLY THAT THE POINT OF THE QUARANTEE
HAS BEEN TO INSULATE THE RATE AGAINST PRESSURE FROM SWITCHING OUT.
THE FACT IS THAT ANY GUARANTEE REQUIRES A SPECIFICATION OF
CONDITIONS, AND YOU WILL APPRECIATE THAT AS A MATTER OF
ACCOUNTABILITY WE HAVE TO SATISFY OURSELVES THAT SUCH CONDITIONS
HAVE BEEN FULLY MET, THIS IS WHY OUR TELEGRAMS. INDICATED THAT WE..
WERE NOT ABLE ENTIRELY TO DISREGARD THE FACT THAT THE HONG KONG
POSITION WAS SOMEWHAT BELOW 100% SATISFACTION OF THESE CONDITIONS
ON THREE SUCCESSIVE MONTHLY REPORTING DATES.
CONFIDENTIAL
/4. WE WOULD OF