Dear Walker,
BANK OF ENGLAND Threadneedle Street
London
EC2R 8AH
30th July 1974.
Sterling Guarantee:
Hong Kong
Please refer to your letter of 25th July to Thornton.
...
I feel that I should put on record that when the Sterling Agreements were drafted in 1968 it was the intention that sterling reserves should be a component of total reserves and the definition clause of the Agreements clearly states that official sterling reserves are those which are "denominated in sterling
and which are included in total official external reserves". Moreover, the amount guaranteed is stated to be that amount of sterling in excess of 10% of total reserves, which further links the two elements together. It seems to me to be illogical to employ figures relating to different dates for the two elements of the eligible balances equation or to make an adjustment to one of the elements without making a similar adjustment to the other. In the administration of the Agreements and the Declarations the UK has consistently followed the principle that when a participant has been required to adjust sterling figures a corresponding change should also be made to total reserves at the same time.
If this principle were to be abandoned in the special formula for Hong Kong I feel that this should have been specifically mentioned to them at the time the formula was devised.
It will be obvious from the above that I find it difficult to accept the opinion of the FCO legal advisers contained in Mrs. Denza's letter of 22nd July which seems to be based on the false premise that official sterling reserves and total official external sterling reserves are not related.
I attach a copy of the Accountant General's reply to the
We sent telex sent on Friday, a copy of which Barber has sent to you. an interim acknowledgement saying that we had referred to HMT which
This we have now prompted an immediate request for detailed working. sent (copy also attached). You may now wish to pursue the matter directly through official channels.
D.A.Walker, Esq.
Yours sincerely,
མཡཾ་ཥ་ད-་་ཤས་