TREASURY CHAMBERS,
18 July 1890
(Red 19 JU 30)
The Lords Commissioners of Her Majesty's Treasury have had under consideration your letter of the 4th ultimo, and its inclosures, relating to the securities to be deposited by the Hong Kong and Shanghai Bank against their note issue.
They gather from these papers that the proposed securities consist of
(1) Chinese Government Securities $1,409,808
(2) Title Deeds of the Bank premises in Hong Kong, valued at $500,000
(3) Mortgage on property of Land Investment Company $600,000
(4) China Merchants Steam Navigation Company's debentures $125,000
Total $2,834,808
This total covers with a small margin the amount of securities required to be deposited (viz: $2,500,000) in order that they may equal one third of the Bank's possible issue; but I am directed to request you to inform the Secretary of State for the Colonies that, in the decided opinion of this Board, the securities proposed to be deposited, other than the Chinese Government Bonds, are not such as can properly be accepted.
The whole object of requiring securities to be ear-marked against notes is to provide a reserve easily realisable; and it is evident that mortgage securities cannot be held to fall within this category; nor indeed would My Lords feel justified in accepting for reserve purposes any securities which have not Government security behind them.
My Lords need hardly remind the Secretary of State that They only agreed to the amendment of the original ordinance...
The Under Secretary of State, Colonial Office.