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more expensive.
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As a means to this end, the Hong Kong Bank were
only too willing to apply penal rates to other banks which were
forced to seek accommodation because they were short of liquid funds. This was good business for the Hong Kong Bank, as its next accounts will I understand show. Whether alternative ways of seeking to reduce credit availability (e.g. withdrawing some part of Government balances with the banking system) would have so easily commended themselves must remain an open question.
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15. Sometimes, of course, Central Banking business may involve foregoing some profit which might otherwise be secured, or taking additional risks. I am in no position to judge to what extent the Hong Kong Bank has foregone profits or taken additional risks in the general Hong Kong interest. Its forward sales of sterling this
summer, for example, seem to have been motivated very largely by commercial considerations. To what extent such sales were considered by the Hong Kong Government to be in Hong Kong's wider interest (including relationships with HMG) we shall never know; but we have no reason to dispute the Hong Kong Government's contention that it was powerless to prevent forward selling when commercial considerations pointed firmly in that direction.
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16. However that may be, one strand of opinion in Hong Kong seems to be that the central banking role of the Hong Kong Bank confers more by way of privilege than by way of responsibility.
One minor
illustration, which I mention because discussion was active whilst I was there. Under the provisions of (I believe) the Securities Bill, brokers have to deposit substantial sureties with the Government.
In turn the Government, if it follows normal practice, will place most or all of these funds with the Hong Kong Bank. Other banks see this as a means of legislating some of their deposits into the Hong Kong Bank. Not, of course, that this process should be entirely unfamiliar. Whilst Hong Kong continues to run a budget surplus, and
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