CDE: MLH0503
NOTE FOR RECORD
BY C D ELSTON
NERVOUSNESS IN HONG KONG
9. 8.91
Copies to GPS
DGPS
Mr Quinn
Mr Crockett
Mr Barnes
Mr Page
Mr D M Sutherland
Mr Compton o/x Section 7
I spoke to Joseph Yam this morning to see whether yesterday's
banking problems had eased today. They had not. I had also spoken
to Tony Nicolle yesterday (now with his Standard Chartered hat)
and Bill Brown had been in touch with RAB.
2 The problem yesterday involved mainly Citibank, it spilled over
on to Chase and then hic Standard Chartered. It seemed to be
largely confined to non-local banks, except that Hang Seng was also
affected. Various possible reasons for the problem were given.
First, general nervousness following the action over BCCI in Hong
Kong. BCCI branches were being picketed by disgruntled depositors
on hunger strike.
There was a suggestion that a campaign of
rumours against foreign banks had been deliberately started by the
BCCI protesters in order to compel the authorities to give
liquidity support to the market, so that the protesters could claim
discriminatory treatment. According to Yam, this would not stand
up, since he had provided liquidity when BCCI's doors were still
open.
3
Then there were apparent remarks about Citibank's solvency by a
US Congressman. According to Yam, nervousness about Citibank
originated in Pakistan. Finally there was a question mark over the
credibility of the Hong Kong Government's recent economic and