MEU 07 OCT 22 08:13
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F3.5
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3. Harbinson, Esq., G.P.,
Deputy Secretary for the Civil Service
Continued....
7th October 1992
costs would guarantor but
be
4. As a bank must maintain capital to support any expansion 11 its balance sheet there would scill be an intereat margın payable, even with an external guarantee. It 13 difficult το quantify what the known without knowing the identity of the guarantee from the Government would certainly command very fine margins. A ten year scheme would of course be more expensive than a five year scheme since price is
term aa well as by
as by the quality of
determined by the loan
the security,
5. You
You asked for my advice in two other areas; a proposal for a purchase of receivables at a discounted rate and an exchange rate hedging mechanism. The problem with both OL these proposals is that it would be almost impossible to price them; this is because HKD interest rate quotations are
generally available beyond one year and for 5
or 10 years banks would find it difficult if not impossible to cover their interest rate risk. discount rate for the receivable and a forward exchange rate for the hedge can only be determined by reference to the interest rate for the period in question.
ة
A
in
I hope I have dealt adequately with the points raised your letter. I leave on business trip this weekend and will not be returning to Hong Kong until the end of the monch buc in my absence please feel free
to contact David Eldon if
you have any further queries.
مسولا
Jon
c.c.
D.G. Eldon, Esq., General Manager Hong Kong and China