M.Oldham, Esq., Department of Industry, 1-19, Victoria Street, London SW1H OET.
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سية
CONFIDENTIAL
BANK OF ENGLAND
Threadneedle Street
London
EC2R 8AH
32
14th November, 1978.
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HKK 173/2
RECCIVED
INDEX
15)
OFFICLE
PA
Y NO. 51
78
ion Taken
No
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HONG KONG:
KOWLOON RAILWAY
Thank you for copying me your note of 10th November.
As I said to you over the telephone, my first point would be that if Ministers wish to subsidise these UK export deals, there seem to me to be better ways of doing it than by tinkering with export credit arrangements in general, or with the tender-to-contract scheme in particular. Secondly, if Ministers do want to subsidise MetCam by means of the tender-to-contract scheme, there seems to me to be no need to bother with HK dollars at all: ECGD could simply quote artificial US $/£ forward rates which had been calculated in order to produce the desired subsidy.
My third point is that if ECGD used such US $/£ forward rates, then when the forward deals were done at contract (with or without Bank of England help), EOGD would need to make up any shortfall between the sterling product of the artificial US $/E rates quoted at tender and the sterling produced by the deals done at actual contract rates.
My fourth point is that if, for some reason which I find hard to see at present, the suggestion is that the subsidy should be given through artificial HK $/£ rates, then there is not only a question of subsidy payment but a problem of doing HK $/£ deals at all, given the absence of an adequate forward market in HK dollars. It would be an improper use of the EEA for the Bank to do such deals: we would require instruction from the Treasury to do them. As I explained over the phone, for very well rehearsed reasons the foreign currency buyer credit scheme is confined to deals in US $ and DM, the only two currencies in which there are stable and settled forward · markets of the necessary width to ensure that HMG's risk of loss under the arrangements is closely contained.
Minute.
I am copying this letter to the other recipients of your
Your brincely
dan't think.
David Shilson.
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