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On (ii), no losses have been incurred on the portfolio. Assets held in the Exchange Fund's name with BIIL's custodians were protected under the United Kingdom insolvency law throughout the period of Baring Group's administration.
On (iii), the Monetary Authority gives precise instructions to the appointed managers of the Exchange Fund, including investment objectives of the portfolios under their management, lists of authorised instruments and maximum positions and exposures. These exposures include exposures to banking counterparties.
On (iv), appointed managers of the Exchange Fund are allowed to invest in financial futures subject to very stringent restrictions; amongst other things these restrictions ensure that the appointed managers do not run open unhedged positions. Positions are reported daily to the Monetary Authority.
On (b), the Government keeps the guidelines to the appointed managers of the Exchange Fund under constant review. The Exchange Fund Advisory Committee has recently considered a report by the Monetary Authority on the wider implications of the Barings episode for the Exchange Fund's funds under outside management. The enabling legislation for statutory bodies require the prior approval of the Financial Secretary before statutory bodies may invest funds. These recent developments will be borne in mind in considering any future applications.
End/Wednesday, March 29, 1995