State for the Colonies was not satisfied as to the Bank's stability in 1894 (Colonial Office letter of 29th August 1894), and I am to suggest that enquiry should be made of the Hong Kong Government as to the Bank's present position, whether the Hong Kong and Shanghai Bank will still receive the notes and credit them to the Government accounts in cash, as was stated to be the case in 1895; also whether it would be for the convenience of the public, as well as of the Bank, that the notes should be accepted.
In the meantime the Manager of the National Bank might be referred to Colonial Office letter of the 31st December 1897 (27426/97) and invited to answer the questions asked therein. If there is any doubt about the soundness of the Bank, it would be competent for Government to say that they will not accept the notes unless they are covered by a deposit of securities to the full amount of the issue.
As regards the second request of the Bank, I am to enquire what view is now taken of the proposal for a Government issue in Hong Kong. The final answer to the Bank might depend upon the prospect of such an issue being established in the near future. But, in any case, the National Bank should not, in Their Lordships' judgment, be permitted to exceed its present limit of issue in Hong Kong unless the Hong Kong Government thinks such increase desirable, and then only on the same condition as applies to the Chartered and the Hong Kong and Shanghai Banks, viz. deposit of coin or bullion to the full value of the excess issue.
I am, Sir,
Your obedient servant,
LVM.
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