3
TUESDAY, NOVEMBER 24, 1981
COMPARED WITH PRIVATE SECTOR INSTITUTION, THE FUND'S SURPLUS ALSO EXCEEDED THE PUBLISHED HALF YEARLY, AFTER TAX PROFIT, OF HONG KONG'S LARGEST BANK BY ABOUT 60 PER CENT, HE SAID.
DURING HIS TALK, MR BLYE ALSO SET OUT TO DISPEL TWO OTHER POPULAR MISCONCEPTIONS: THE BELIEF THAT THE PROCEEDS OF THE NOTE ISSUE WERE USED FOR THE BENEFIT OF THE SHAREHOLDERS OF THE
TE ISSUING BANKS- AND THAT THERE WAS AN OBLIGATION TO MAINTAIN A MINIMUM 105 PER CENT ASSET COVER FOR THE NOTE ISSUE.
-
ON THE FIRST ONE MR BLYE SAID: THE NOTE ISSUE MECHANISM IN HONG KONG IS AN AUTOMATIC PROCESS EACH NOTE ISSUING BANK INCREASES ITS ISSUE IN ACCORDANCE WITH ITS OWN NEEDS AND THE NEEDS OF ITS CUSTOMERS (INCLUDING OTHER BANKS).+
THE BANK DID SO BY ACQUIRING CERTIFICATES OF INDEBTEDNESS FROM THE EXCHANGE FUND EQUIVALENT TO THE VALUE OF THE NOTES IT WISHED TO ISSUE.
+THE NOTE ISSUING BANKS PAY THE FACE VALUE OF THE CERTIFICATE OF INDEBTEDNESS ISSUED TO THEM INTO AN EXCHANGE FUND ACCOUNT IN THE IR BOOKS,+ HE SAID.
+ I HAVE EXPLAINED HOW THE MONEY RECEIVED BY THE FUND IS USED AND THAT IT IS EMPLOYED FOR THE BENEFIT OF THE EXCHANGE FUND, AND THEREFORE FOR THE COMMUNITY.
+ IT FOLLOWS THAT THE SHAREHOLDERS OF THE NOTE ISSUING BANKS DO NOT DIRECTLY BENEFIT FROM THE FUNDS WHICH FLOW FROM THE NOTE ISSUE. +
ON THE SECOND MISCONCEPTION, MR BLYE SAID IT AROSE FROM THE WORDING OF THE EXCHANGE FUND ORDINANCE.
SECTION 8 OF THE ORDINANCE, HE SAID, STATES THAT ANY SUM OR ANY PART OF ANY SUM IN EXCESS OF THE AMOUNT REQUIRED TO MAINTAIN THE ASSETS OF THE FUND AT 105 PER CENT OF TOTAL LIABILITIES MAY BE TRANSFERRED TO THE GENERAL REVENUE OF HONG KONG.
+WHAT THE ORDINANCE SAYS IS THAT MONEY CANNOT BE TRANSFERRED TO OTHER GOVERNMENT ACCOUNTS UNLESS THE ASSETS OF THE FUND ARE IN EXCESS OF 105 PER CENT OF LIABILITIES. THERE IS NO MINIMUM COVER REQUIREMENT.+
MR BLYE ADDED THAT THE COVER FOR THE NOTE ISSUE AND THE FUND'S TOTAL LIABILITIES WAS SUBSTANTIALLY IN EXCESS OF 105 PER CENT AND THAT COVER WAS HELD LARGELY IN HIGHLY-LIQUID FOREIGN CURRENCY ASSETS.
/4