CO537-(1262-1649) — Page 108

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Dear Caine,

The Chartered Bank of India, Anstralia & China.

Hongkong.

38. Bishopsgate 72

London

E.C.2.

1st May

19 46

It is some three weeks ago since Crichton and I had our interview with you on 5th April, at which you informed us of the decisions which had been arrived at in regard to the Government's attitude toward the Hongkong & Shanghai Banking Corporation in the matter of the Notes of that Bank which were issued under duress during the Japanese occupation of Hongkong, and of the understanding between the Government and the Hongkong Bank regarding the manner and procedure whereby the Clearing balances held by the Hongkong Bank in the names of other Banks in Hongkong at the time of the Japanese occupation should be liquidated.

We were informed that in the matter of bearing the burden of notes issued under duress during the Japanese occupation of Hongkong, the other two note-issuing Banks would receive similar consideration to that to be afforded to the Hongkong Bank; but as the application of the procedure for liquidating the Clearing balances of the two Banks might dispose of any need for action in this respect, we were requested to examine the position on the basis of actual figures and report the result to you.

Without attempting to go into detail, the proposed procedure for liquidating the Clearing balances of Banks held by the Hongkong Bank at the time of the Japanese occupation is that the Hongkong Bank will pay out these balances in full, subject only to deduction where it proves that, with funds derived from the Hongkong Bank, the liqui- dator fully and finally reduced liabilities of the Bank concerned. In estimating whether in fact liabilities were reduced from this source, it was agreed that it would be in order and proper to reckon that liabilities were reduced by the application of, and in the following order:-

(1) Cash Balances held or signed notes in the till.

(2) Unissued Signed Notes in Reserve, and Notes

signed under duress.

(3) Pre-occupation balance with the Hongkong Bank.

(4) Proceeds of Assets realised by the liquidator.

and such being the case, it would hardly seem necessary for any assistance of the nature proposed for the Hongkong Bank to be extended to the Chartered Bank, for it will be clear that, unless the reduction in liabilities brought about through the operations of the so-called Japanese liquidator eventually proves to be less than the sum of categories (1) and (2), no claim for loss in respect of notes signed and/or issued under duress could be sustained.

/Having

cms

Ref.:

CO 537/1369

THE NATIONAL ARCHIVES

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