JUERMENT HOUSE HONG KONG.
TUE IS SEP 92 09:06
PG.02
HongkongBank
The Hongkong and Shanghai Banking Corporation Limited
Head Office: 1 Queen's Road Central, Hong Kong
JM Gray
Chief Executive and Deputy Chairman
STRICTLY PRIVATE & CONFIDENTIAL
11th September 1992
The Hon. E.B. Wiggham, C.B.E., J.P.,
Secretary for the Civil Service, Government Secretariat,
Lower Albert Road,
Hong Kong.
Your Ref (47) in CSB-S/8 VI
Dwa Barry,
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PENSION SAFEGUARDS
520
Thank you for your letter dated 4th September asking for my views on an alternative loan scheme to that referred to in letter dated 17th August.
my
I would have to say that I do not think that this alternative loan scheme would practice be feasible. The declared in- tention of the scheme is to safeguard the sterling value of the commuted pension but the scheme itself has the following
drawbacks:
the
1. There would be an immediate exchange risk, both for
bank and for the borrower. To protect itself against this would have to call for margin. exchange risk the bank Given the sort of swings in the GBP/HKD excllany
seen this year the initial margin would probably have have to pay be around 10%, and this the officer would from his own resources.
по
the
Lete
2. As long as the GBP/HKD exchange rate continued,to appre- initial clate there
to increase be
need would margin. If it began to depreciate however the margin would need to be topped up, and here again the officer would have to do this from his own resources. I need hardly remind you that, although GBP has been very strong recent- ly, there is no guarantee that it will remain strong over a period as long aa five years.
HKD 3. Although GBP deposit rates are presently higher than
lending rates there is again no guarantee that this situ- ation will last over a five year period. Should it reverse
to bear the interest itself the officer, will have
differential.
rate
GPO Box 64, Hong Kong
Telephone:822 1111 Facsimile:(852) 868 0244. Telex:73201 HXBG KX Telegrams: Hongbank Hongkong
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