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MONDAY, OCTOBER 18, 1982
+THE SUGGESTION HAS AGAIN BEEN MADE THAT THE BENEFIT OF INVESTMENT BY THE EXCHANGE FUND IN STERLING IS OVERWHELMINGLY ONE WAY, IN BRITAIN'S FAVOUR. THE POINT I WISH TO MAKE IS SIMPLY THAT THE RELATIVELY SMALL AMOUNT OF STERLING WHICH IS HELD BY THE EXCHANGE FUND IS HELD ENTIRELY AT OUR OWN VOLITION - AS ARE THE OTHER CURRENCIES IN WHICH THE FUND INVESTS - AND THAT THE BENEF IT, IF IT IS INSISTED THAT ONE CAN BE IDENTIFIED, IS THE MUTUAL ONE THAT EXISTS WHEN A BORROWER AND A LENDER DO A DEAL, ONE ENJOYING AN INTEREST YIELD BY AGREEING TO PART WITH FUNDS FOR A CERTAIN PERIOD, WHILE THE OTHER ENJOYS, FOR A PRICE, THE USE OF THE FUNDS FOR THAT PERIOD.
+PERHAPS IT IS NOT UNDERSTOOD THAT WE SEEK OUT THE BEST AVAILABLE RATES OF RETURN ON ALL THE EXCHANGE FUND'S INVESTMENTS, AND THAT NATURALLY WE HOLD A WIDE SPREAD OF CURRENCIES. THIS IS WHAT ANY PRUDENT MANAGER WOULD DO,+ HE SAID.
TO SET THE ISSUE IN PERSPECTIVE, HE RECALLED THAT IN HIS PREVIOUS TALK, HE HAS SAID STERLING ACCOUNTED FOR ONLY ABOUT 10 PER CENT OF THE FUND'S FOREIGN CURRENCY PORTFOLIO. +INCIDENTALLY, THE PROPORTION HELD IN STERLING IS SMALLER TODAY, HE SAID.
IN HIS SPEECH TO THE ROTARY CLUB TODAY, MR BLYE JUST IF IED THE FUNCTIONS OF THE HONG KONG ASSOCIATION OF BANKS BECAUSE SOME PEOPLE FOUND IT DIFFICULT TO RECONCILE THE SPIRIT OF FREE ENTERPRISE AND MARKET FORCES WHICH CHARACTERISES HONG KONG WITH A CONTINUING CARTEL ARRANGEMENT AMONGST BANKS.
HE EXPLAINED THAT BECAUSE OF THE INSTITUTIONAL STRUCTURE OF THE HONG KONG FINANCIAL SYSTEM AND PRUDENT GOVERNMENT BUDGETARY POLICIES, THE GOVERNMENT DOES NOT HAVE AT ITS DISPOSAL SUCH A RANGE OF MONETARY INSTRUMENTS AS SOME OTHER GOVERNMENTS DO.
BY OBLIGING HKAB TO CONSULT ON INTEREST RATES ON DEPOSITS, THE GOVERNMENT CAN INFLUENCE THOSE DEPOSIT RATES WHICH ARE FIXÉD BY THE ASSOCIATION, HE SAID.
AS THE BANKS' DEPOSIT RATES UNDERPIN ALL OTHER INTEREST RATES, THE EXTENT OF THE INFLUENCE EXERTED BY THE GOVERNMENT IS WIDER THAN IT MAY SEEM AT FIRST SIGHT, HE ADDED.
+HKAB DEPOSIT RATES ARE AN IMPORTANT DETERMINANT, ALTHOUGH BY NO MEANS THE ONLY ONE, OF HK$ INTEREST RATES IN GENERAL,+ HE EXPLAINED.
ALTHOUGH AN INCREASING AMOUNT OF BUSINESS IS CONDUCTED, EVEN BY THE BANKS THEMSELVES, AT MARKET RATES, THESE RATES ARE TO SOME EXTENT INFLUENCED BY HKAB RATES, BECAUSE IF THE BANKS' COMPETITORS ARE SEEKING DEPOSITS, THEN THEY MUST OFFER RATES WHICH ARE AT LEAST AS HIGH AS HKAB RATES, HE SAID.
HKAB INTEREST RATE RULES, AND THE OTHER RULES SUCH AS THOSE ON AGREED CHARGES, ALSO HELP TO GUARD AGAINST SOME OF THE MORE EXTREME FORMS OF CUT-THROAT COMPETITION WHICH MIGHT OTHERWISE DEVELOP.
TUTE SAFTIGS