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POSITIONS. CURRENTLY, THE HONGKONG BANK GROUP HAS ALMOST 30 PER CENT OF TOTAL DEPOSITS, THE MAINLAND CHINA BANKS HAVE ABOUT 15 PER CENT (SOMEWHAT LARGER IF WE ADD KA WAH AND UNION BANK OF WHICH OTHER CHINESE ENTITIES HAVE ASSUMED CONTROL) AND STANDARD CHAPT- ERED SOMETHING LESS THAN 6 PER CENT, .E. WELL BELOW THE TWO LEADING GROUPS BUT WELL ABOVE ANY OTHER INDIVIDUAL BANK WHETHER LOCAL OR FOREIGN. A COUPLE OF ACQUISITIONS MIGHT BRING THEM UP TO ABOUT 8 PER CENT BUT, OF COURSE, THEIR POTENTIAL FOR GROWTH WOULD BE SUBSTANTIAL. COMPETITION FOR MARKET SHARE BETWEEN THESE THREE GROUPS PLUS THE THREE LARGEST AMERICAN BANKS AND TWO JAPANESE BANKS WOULD CLEARLY FURTHER SQUEEZE THE REMAINING LOCAL
BANKS.
THERE COULD ALSO BE TWO FURTHER CONSEQUENCES.
3. A CLEAR GROUPING ON THESE LINES WOULD LEAVE BANK OF EAST ASIA IN AN EXPOSED POSITION. THIS IS A WELL RUN, CONSERVATIVE AND PROFITABLE BANK WITH #TS SHARES TIGHTLY HELD BY THE FOUNDER
FAMILIES.
IT COULD WELL FIND ITSELF IN THE CLASSIC SQUEEZE ON
THINKING THE MEDIUM SIZED WHEN THE BHG UNITS REGIN TO COMPETE.
AHEAD FURTHER, THE HONGKONG BANK WOULD NATURALLY LOOK TO ITS OWN DEFENSIVE STRATEGY GIMING EMPHASIS TO ANY FURTHER THOUGHTS OF OVERSEAS ACQUISITIONS.
6. AS I SAID THERE IS MORE SPECULATION IN ALL THIS THAN HARD FACT. SIR Y K'S VISIT TO LONDON MIGHT GIVE US MORE FACTS AND WOULD VERY MUCH WELCOME YOUR REACTIONS AND THOSE OF THE BANK OF ENGLAND.
AKERS-JONES
YYYY
HMLNAN 9696
LIMITED
HKD
FED
ECON. ADVISERS
PS/MR RENTON
SIR W. HARDING DR WILSON
COPIES TO:
MR C. KELLY, H.M. TREASURY MR P. KENT, BANK OF ENGLAND
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