CONFIDENTIAL
077206*
MDHIAN
BANKING OR OTHERWISE, AND ITS DOMESTIC BANKING BUSINESS IS VERY LIMITED IN SCOPE AND NATURE, EVEN THOUGH MEETING EXCO'S FORMAL SIZE. CRITERIA FOR LOCALLY (REPEAT LOCALLY) INCORPORATED BANKS. JF AND CO'S APPLICATION MADE IT ABUNDANTLY CLEAR THAT THEY WERE SEEKING A BANKING LICENCE IN ORDER TO CONFER ENHANCED STATUS ON THE GROUP AS A WHOLE, RATHER THAN TO DEVELOP AS A COMMERCIAL BANK, FOR WHICH THEY DO NOT HAVE THE EXPERTISE. IN OTHER WORDS THEY DEMONSTRATED NO CLEAR NEED FOR THE WIDER DEPOSIT-TAKING POWER WHICH A FULL BANKING LICENCE WOULD HAVE CONFERRED.
13. THE PRESENT POSITION IS THAT EXCO HAVE NOT FORMALLY REJECTED JF AND CO'S APPLICATION. THE APPLICATION (LIKE WARDLEY'S) LIES ON THE TABLE, NOT HAVING BEEN PUT BACK TO EXCO FOLLOWING THE DECISION NOT AT THIS STAGE TO CHANGE THE LICENSING CRITERIA. INFORMALLY IT HAS BEEN PUT TO JF AND CO THAT THEY MIGHT WISH TO LET MATTERS REST WHILE WE SEE HOW THE NEW THREE-TIER SYSTEM WITH ITS PROVISION FOR INSTITUTIONS LIKE JF AND CO TO CALL THEMSELVES A MERCHANT BANK, WORKS IN PRACTICE. JF AND CO LOCALLY HAVE MADE IT CLEAR THAT THEY SEE NO PROBLEM WITH THIS. INDEED WHEN BURNETT-STUART THE RETIRING CHAIRMAN OF ROBERT FLEMING AND SMITH, THE MANAGING DIRECTOR OF JARDINE FLEMING HOLDINGS CALLED ON ME RECENTLY THEY DID NOT RAISE
THE ISSUE. WHEN I RAISED IT MYSELF AND HOPED THAT THE ABILITY TO CALL THEMSELVES A MERCHANT BANK EVEN IF THEY DID NOT HAVE A FULL LICENCE HELPED, THEY SAID THE FULL LICENCE WAS NOT A MAJOR PROBLEM FOR THEM: THEY WERE DOING VERY WELL AND HAD MANY OTHER MORE IMPORTANT MATTERS TO CONCENTRATE ON.
14. WE HAVE MADE IT CLEAR TO JF AND CO THAT WE STAND READY TO
INTERCEDE ON THEIR BEHALF IN ANY CASE WHERE THEY FEEL THAT THEIR
LACK OF FULL BANKING STATUS IS HAMPERING THEM INTERNATIONALLY.
FAR THEY HAVE NOT/NOT TAKEN UP THIS OFFER.
SO
15. YOUR TELNO 879, PARA 3: LOBBYING. I AM NOT AWARE THAT LOBBYING AGAINST JF AND CO HAS PLAYED ANY PART IN THE EXCO DECISION, IF INDEED IT HAS OCCURRED WHICH IS ALWAYS HARD TO DETERMINE. LOBBYING
ON BEHALF OF JF AND CO MAY HAVE HARDENED SOME VIEWS BUT I DOUBT IF
THIS WAS A SIGNIFICANT FACTOR. AS DESCRIBED ABOVE THE DECISIONS TAKEN SO FAR HAVE THEIR OWN CLEAR LOGIC.
WILSON
YYYY
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CONFIDENTIAL