CONFIDENTIAL
FM FCO
TC?
TO IMMEDIATE HONG KONG
TELNO 1263
OF 211411Z AUG 92
CONFIDENTIAL
Cer
сереј Сет губрез
HKA 233/1
INFO ROUTINE PEKING, UKREP JLG HONG KONG
دام
507
502
145424
MDHOAN 9429
YOUR TELNO 2151: HMOCS: PRIVATE SECTOR PENSION OPTIONS
1. WE ARE A LITTLE PUZZLED BY TUR AND THE LETTER FROM JOHN GRAY CHONGKONG BANK).
2.
FOLLOWING YOUR MEETING WITH THE SECRETARY OF STATE AND MR PORTILLO AND OUR SUBSEQUENT DISCUSSIONS WITH TREASURY OFFICIALS, OUR TELNO 1144 OF 24 JULY EXPLAINED WHY WE BELIEVED IT NECESSARY TO INCLUDE IN OUR OPTIONS PAPER SOME ILLUSTRATIVE AND COSTED EXAMPLES OF THE SORT OF (LIMITED AND TO OUR MIND INADEQUATE) PRIVATE SECTOR SCHEME WHICH BARINGS HAD CONSIDERED WOULD PROBABLY BE FEASIBLE. (AS OUR TUR SET OUT, THESE MIGHT OR MIGHT NOT INVOLVE AN HMG GUARANTEE AGAINST THE RISK OF DEFAULT. IF THERE WERE NO HMG GUARANTEE, THE LENDER WOULD BEAR THE RISK OF DEFAULT AS WELL AS THE MAIN EXCHANGE-RATE RISK, IE THE RISK THAT THE VALUE OF THE HK DOLLAR WHEN THE COMMUTABLE ELEMENT OF AN OFFICER'S PENSION BECAME PAYABLE WOULD BE LOWER THAN WHEN THE LOAN WAS MADE TO THE OFFICER). WE HAD UNDERSTOOD FROM YOUR TELNO 2082 THAT CIVIL SERVICE BRANCH/FINANCE BRANCH HAD ASKED THE HONGKONG BANK TO LOOK AT THIS.
3.
HOWEVER GRAY'S LETTER SEEMS TO BE CONCERNED WITH A DIFFERENT KIND OF SCHEME, WHICH HE POINTS OUT WOULD BE FEASIBLE ('A BANKABLE PROPOSITION') BUT WOULD NOT MEET CIVIL SERVANTS' CONCERNS: IT WOULD GIVE THEM NO PROTECTION AGAINST DEFAULT, UNLESS POLITICAL RISK INSURANCE COULD BE ARRANGED SEPARATELY, IN WHICH CASE THE BANK WOULD PLAY NO USEFUL ROLE.
WE SHOULD BE GRATEFUL FOR CLARIFICATION AND PREFERABLY STILL FOR THE SORT OF ILLUSTRATIVE COSTINGS WE ASKED FOR BEFORE, IF THE HONGKONG BANK OR STANDARD CHARTERED ARE PREPARED TO PRODUCE THEM. (IF THE BANKS ARE SIMPLY REFUSING TO CO-OPERATE, IT MIGHT BE HELPFUL TO HAVE CHAPTER AND VERSE TO USE WITH THE TREASURY.) IF WE TRY TO TABLE A PAPER WITHOUT THESE, IT WILL BE ALL TOO EASY FOR THE TREASURY TO ARGUE THAT WE HAVE FAILED TO
INCLUDE AN OPTION WHICH WAS FIRST IDENTIFIED MONTHS AGO AND
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CONFIDENTIAL