On the other requirements we set out at the time of the merger talks, the position is as follows:
Working party on Hong Kong risk
HSBC undertook to prepare an internal working party report on how best to minimise the financial consequences of major economic risk or collapse in Hong Kong for the group. As agreed, an interim report was received before Christmas and the final report is due to us by 10 July 1993. In the final report, HSBC has indicated that it will look at ways of insulating the group further from a major systematic crisis or collapse in Hong Kong, including the pros and cons of subsidiarisation of HSBC Ltd branch operations in each country.
Movement of mind and management
You will recall that one of our key supervisory requirements accepted by HSBC was the movement of the group's mind and management from Hong Kong to London with effect from 1 January 1993. HSBC, accordingly, announced the appointment of John Bond as the new Group Chief Executive of HSBC Holdings plc with effect from 1 January 1993. Sir William Purves remains Executive Chairman and will continue to be based in Hong Kong until September 1993, when it is expected that he will relocate to London. Richard Delbridge, previously Midland's finance director, is now Executive Director Finance of Holdings. The other key executives will relocate to London from Hong Kong during Q1 1993. Group functions which have moved or are in the process of doing so include Group Finance, Credit & Risk, Internal Audit, Planning and IT Services. The board of Holdings has formally passed a resolution transferring the Head Office and the Registered office from Hong Kong to London with effect from 1 January 1993. The group head office will be 10 Lower Thames Street, currently the home of Samuel Montagu.
Ring fencing and dealing room
The main focus of the merger in the past six months has been the amalgamation of the treasury operations in both Midland and HSBC. This project is well on course and is nearing completion.
As part of the ring fencing process, we said that we wanted Midland to act as the group treasury on behalf of HSBC Holdings. Accordingly, HSBC has moved its London, New York and Tokyo treasuries into Midland during November/December. All dealings with effect from January 1993 will be in Midland's name. In London, both Midland and HSBC's treasury operations are moving into a brand new dealing complex at Thames Exchange. HSBC Ltd will retain a small separate dealing desk in London for the onplacement of surplus liquidity from Hong Kong in the London money markets. HSBC have agreed to adhere to stringent restrictions on intra-group funding, particularly between HSBC Ltd in Hong Kong and the rest of the
group.
Foreign exchange limits
We have agreed with John Gray (Executive Chairman of HSBC Ltd) that both HSBC Ltd and Hang Seng Bank (the 64% owned Chinese retail bank in Hong Kong) can work to a long HK dollar position of US$100mn each. This requirement was set as a means of minimising group