GRS 500
SECRET
SECRET
FROM HONG KONG
TO PRIORITY FCO
TELNO 2448
OF 29060OZ JULY 86
STANDARD CHARTERED
MKK 1001
4x6%
THERE IS STILL MORE SPECULATION THAN HARD FACT FOLLOWING SIR Y K PAO'S ACQUISITION OF SHARES IN THIS BANK.
2.
THE HONGKONG BANK AT ALL LEVELS DENY ANY IMPLICATION IN THE DEAL AND # ACCEPT THIS. SIMILARLY BROWN OF STANDARD CHARTERED HAS TOLD ME CATEGORICALLY THAT HIS BANK HAS NOT ASSISTED SIRY K IN ANY WAY. WHATEVER HIS SOURCE OF FUNDS (AND SOME SOURCES HAVE SUGGESTED WE SHOULD NOT PULE OUT THE FORAY AS A PERSONAL VENTURE), SIP Y K CLEARLY BELIEVES HIS NEAR 15 PER CENT STAKE GIVES HIM CONSIDERABLE LEVERAGE IN STANDARD CHAPTERED ALMOST IN A SENSE OF BOARD ROOM CONTROL WITHOUT HAVING NECESSAPILY TO GAIN EQUITY CONTROL. YOU SHOULD RE AWAPE THAT SIR Y K TOLD ME THAT HIS NEXT STEP WAS TO VISIT THE GOVERNOR OF THE BANK OF ENGLAND AND THE PRIME MINISTER FOR DISCUSSIONS ABOUT FUTUPE POSSIBILITIES.
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BOTH SIP Y K AND BROWN HAVE TALKED ABOUT MAJOR RESTRUCTUPING. THIS APPEARS TO INVOLVE PUTTING TOGETHER THE BANK'S FAR EASTERN OPERATIONS INTO A LOCAL ENTITY AND POSSIBLY THE ACQUISITION OF SOME SMALLER HONG KONG BANKS TO BROADEN THE BASE HERE. GRANTING A LICENCE TO ESTABLISH A BANK HERE IS A MATTER FOR THE EXECUTIVE COUNCIL BUT ANY LIKELY REGIONAL PART OF STANDARD CHARTERED SHOULD EASILY MEET THE LEGAL AND FINANCIAL PEQUIREMENTS OF THE BANKING ORD-INANCE. THE MAJOR DIFFICULTIES SEEM TO US TO BE IN LONDON SINCE IT IS NOT AT ALL CLEAR WHAT BENEFITS WOULD ACCRUE TO THE ORDINARY SHAREHOLDER FROM SUCH A RESTRUCTURING.
IN THE IMMEDIATE FUTURE, WE APPEAR TO HAVE NO PROBLEMS IN THAT STANDARD CHARTERED REMAINS AN ENTITY AS OUR SECOND NOTE- ISSUING BANK. BUT LONGER TERM AND PERHAPS SOONER RATHER THAN LATER ANY RESTRUCTING IN THE PAO SENSE WOULD HAVE A LOOSENING EFFECT ON OUR MARKET BY ENCOURAGING OTHER BANKS TO CONSIDER THEIR
/POSITIONS
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