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TUESDAY, APRIL 1, 1986
THE FINANCIAL SECRETARY AND THE BANKING COMMISSIONER WOULD RIGHTLY BE CRITICISED IF THEY STOOD AND WATCHED A COLLAPSE LEADING TO A RUN ON SEVERAL BANKS BECAUSE THEY CONSIDERED THEY HAD NO POWERS OR WERE AFRAID TO USE THE POWERS THEY POSSESSED.
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PREVENTION OF DIFFICULTIES
WE ARE CONCERNED ABOUT ACTUAL EVENTS NOT ABOUT THEORETICAL POSSIBILITIES. THE DEBATE SHOULD NOT BE ABOUT THE USE OF POWERS
THE NEW TO DEAL WITH THE FIRE BUT ABOUT FIRE PREVENTION. BANKING BILL HAS BEEN PUT FORWARD WITH THESE ISSUES IN MIND.
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SUFFICIENCY OF EXCHANGE FUND
IF ANY OF THE CONFUSION ARISES FROM DOUBTS ABOUT THE SIZE OF THE EXCHANGE FUND, LET ME MAKE THE POSITION CLEAR. THE SURPLUSES OF THE EXCHANGE FUND LET ME EMPHASISE, THE SURPLUSES ARE HONG KONG'S INNER RESERVES. THESE HAVE BEEN GROWING IN SPITE OF ALL THE DIFFICULTIES AT A VERY SATISFACTORY RATE IN RECENT YEARS AND CONTINUE TO DO SO.
ACTION WE HAVE TAKEN TO SUPPORT SOME BANKS HAS. BY PRESERVING STABILITY, PROTECTED THE EXCHANGE FUND FROM HAVING TO BE USED IF IN A MORE DIRECT WAY AT A MUCH GREATER COST. IN ANY CASE, THE SUM OF ALL THE CONTINGENT LIABILITIES INCURRED IN MAINTAINING ORDER IN THE BANKING SECTOR HAD TO BE MET WHICH IS MOST UNLIKELY -- THE COST TO THE EXCHANGE FUND WOULD BE MUCH LESS THAN THE GROWTH IN THE SURPLUSES OVER THE LAST FOUR YEARS.
IN OTHER WORDS, THE ACTUAL COST OF THE SUPPORT IS WELL WITHIN THE GROWTH OF THE SURPLUS OF THE EXCHANGE FUND WHILE ACTION TAKEN THIS WAY SAVES BOTH A SEVERE POTENTIAL LOSS BY THE FUND AND MORE IMPORTANTLY SOCIAL AND ECONOMIC DISTRESS.
THE PROOF OF THE SUCCESS OF THIS POLICY IS SEEN IN INTERNATIONAL CONFIDENCE IN HONG KONG. INTERNATIONAL BANKS ARE STILL QUEUING TO ENTER HONG KONG AND ONE REASON FOR THIS CONFIDENCE IS THAT INTERNATIONAL BANKERS ARE CONVINCED THAT THE HONG KONG GOVERNMENT WILL DEAL IMMEDIATELY WITH PROBLEMS AS THEY ARISE AS WOULD ANY OTHER CENTRAL BANK IN ANY OTHER INDUSTRIALISED SOCIETY.+
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