CONFIDENTIAL COMMERCIAL IN CONFIDENCE
064510
MDLIAN 269
G. THE ENLARGED HSBC GROUP SHOULD MAINTAIN A MINIMUM CAPITAL RATIO OF 9.5 PER CENT.
H. HONG KONG BANK SHOULD LIMIT ANY LONG POSITION IN HONG KONG DOLLARS.
I. WHILE HSBC HOLDINGS MAY GIVE A COMFORT LETTER TO HONG KONG BANK, IT SHOULD BE RECOGNISED THAT SUPPORT MIGHT NOT BE GIVEN IN CERTAIN EXTREME CIRCUMSTANCES. (IT HAS YET TO BE AGREED PRECISELY HOW THIS WILL BE EMBODIED IN THE TERMS OF THE COMFORT LETTER).
2. YOU WILL HAVE SEEN SEPARATELY (MY TELNO 1489) THAT WE PROPOSE TO INCLUDE THE QUESTION OF THE HSBC/MIDLAND MERGER ON THE AGENDA OF THE NEXT MEETING OF THE CONFIDENTIAL FINANCIAL DIALOGUE. WE WILL BASICALLY BE IN LISTENING MODE DURING THIS MEETING.
3. AT THIS STAGE, I DO NOT SEE ANY NEED FOR ANY FURTHER ACTION WITH THE CHINESE BY EITHER HKG, HMG OR HSBC. THE ISSUE IS NOW VERY MUCH IN THE PUBLIC ARENA AND ULTIMATELY A MATTER FOR THE SHAREHOLDERS OF MIDLAND BANK.
WILSON
YYYY
DISTRIBUTION
38
MAIN
38
HKD
FED
PS/MR PATTEN PS/PUS
ECONOMIC ADVISERS
SIR J COLES
ERD
MR CROWE
PS
MR BURNS
PS/MR GOODLAD
MR BONE
NNNN
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CONFIDENTIAL COMMERCIAL IN CONFIDENCE