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HongkongBank
The Hongkong and Shanghai Banking Corporation Limited
Head Office. ! Queen's Road Centrai, Hong Kong
IM Gray
HKA 016/1
57
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M Lane, EC Aduses the Stone
File
me
Chief Executive and Deputy Chairman
STRICTLY PRIVATE & CONFIDENTIAL
ir, . . Yeung,
Secretary for the Treasury,
Government Secretariat,
Lower Albert Road,
liong Kong.
Your Ref: (23) in FIN CR 1/4366/81 Pt 8
Dead K.Y.
Pension Safeguards
ап
17th August 1992
I refer to your letter dated 29th July and to the discussions which took place in this office on 8th August.
As I explained on the telephone today we nave gone into this proposal in some detail but I am sorry ६० say that we have been unable to come up with a scheme which would meet the concerns of civil servants.
The proposal envisages a bank making a loan to a civil servant which would be secured by a time deposit funded from the proceeds of the loan. This is certainly a bankable proposition but at this stage, and until the pension is paid out, the civil servant will not be receiving the protection ne seeks. This is because, in the event that the Government defaults on ics pension obligations, the bank will exercise its security rights over the deposit to repay the loan, leaving the civil servant out of pocket on the interest margin and the loan fee but in the same position as he is in at present.
insurance
The potential safeguard of course comes from the scheme, but from enquiries we nave made in the insurance market we believe it would be very difficult
raise cover
for the amounts and the period necessary. Political risk insurance is a very specialised market; although there may be appetite for a degree of Hong Kong risk I am led to believe that LDC (Lesser Developed Country) claims in recent years have made the reinsurance market for political risk both shallow and expensive. The leading political risk insurer however is American Insurance Group ("AIG") and I would suggest that, if you decide to pursue
to pursue this proposal further, AIG should be your first point of contact.
OPO Box 64, Hong Kong
Telephone:822 1111 Facsimile:(852) 868 0244 Telex:73201 HKBQHX Telegrams: Hongbank Hongkong
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