CO537-(1262-1649) — Page 193

TELEGRAPHIC ADDRESS.

SONIFACE, STOCK, LONDON.

"ALL LETTERS TO BE ADDRESSLO

REMITTANCES HADE PAYABLE TO

THE HONGKONG AND SHANENAI BANKING CORPORATION"

MOT TO INDIVIDUALE.

00157

The Nongkong and Shanghai Banking Corporation.

INCORPORATED IN THE COLONY OF HawaKoNS. THE LIABILITY OF MENBERG IS LIMITED TO THE EXTENT AND IN MANNEN PRESGRIVED BY OrdinANCE NO. É or 1920 or THE COLONY.

9. Gracechurch Sheet London. 5.C.3.

February 6th, 1946. Y.

154

8

THE NATIONAL ARCHIVES

cms

CO 537/1369

Ref.: restrictions. Further information is given in the enclosed Terms and Conditions of supply of National Archives' leaflet. Please note that this copy is supplied subject to the National Archives' terms and conditions and that your use of it may be subject to copyright

Dear Caine,

In order to enable me to submit to Morse the

suggestion which you put forward yesterday as to the relative proportions in which the loss to the Exchange Fund consequent

on the validation of the unlawfully issued notes might be

borne by Government and the Bank, I shall be glad if you will

confirm or correct the version of the proposed formula which

Reid, Muriel and I understood as follows:-

1. The Bank to agree to accept the unlawfully issued

notes as its own bank notes on the sale basis as all its notes lawfully issued subject to the following terms

2. Legislation to be passed in Hong kong declaring

the notes as legal tender currency of the Colony.

3. The Government to issue a Certificate of Indebted- ness for the amount of the whole of the unlawfully issued notes less the equivalent of £1,000,000 sterling. In consideration of this the bank to deposit with the Exchange Fund

4.

(a) immediately the amount of £1,000,000,

(b) as and when information is available to shew

what port on of the unlawfully issued notes has been used in discharge of the bank's legal liabilities, the sterling equivalent of the full amount of such portion.

The equivalent of £1,000,000 which is not covered by the Certificate of Indebtedness to be treated as an increase in the fiduciary issue without any cover from the bank and legislation to be passed

authorising this increase.

The formula i, of course, understood to be

without any implication of any legal liability.

S.Caine, Esq.,C.M.G.,

Colonial Office,

Dover House,

WHITEHALL,3.W.1.

Yours sincerely,

J. Rares

2

Jos