TREASURY
14391
REG 1 OCT 956)
525
opportunity should be availed of for placing the security of the Bank on a sounder footing, and that Chinese Government Bonds should not hereafter be accepted.
We are not aware of the circumstances in which it was decided to accept such Bonds as part security for the note issue of the Bank, but since 1890 the Chinese Government has had, and apparently will have to continue, to borrow very largely so that its securities have necessarily become of a highly speculative character, and it is almost certain that if the Bank were to get into difficulties it would be the result of financial troubles in China which would also have the effect of depreciating the securities of the Chinese Government.
There is a further objection also to the present proposal of the Bank. The Bonds now offered as security form a portion of a loan of £16,000,000 which the Hong Kong and Shanghai Bank has undertaken in conjunction with certain German Banks. Of this amount about £5,000,000 was placed in March last and the balance was offered to the public about a fortnight since but we understand that only about half the amount was placed and that the balance had to be taken by the guarantors, of which the Hong Kong and Shanghai Bank was the largest. The acceptance therefore of the proposal of the Bank would be to set free a large amount of its funds which are now locked up and to accept as part security for its note issue Bonds which have not been considered good enough by the public and the Stock Exchange for their own purposes.
I beg to suggest that we should be authorised to inform the Bank that the Trustees regret that they do not feel able to accede to its present application and that they will...
2.
will
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TREASURY
14391
REG 1 OCT 956)
525
opportunity should be availed of for placing the security
of the Bank on a sounder footing, and that Chinese Govern-
We are not ment Bonds should not hereafter be accepted.
aware of the circumstances in which it was decided to accept such Bonds as part security for the note issue of the Bank, but since 1890 the Chinese Government has had, and apparently will have to continue, to borrow very largely so that its securities have necessarily become of a highly speculative character, and it is almost certain that if the Bank were to get into difficulties it would be the result of financial troubles in China which would also have the effect of depreciating the securities of the Chinese Government.
There is a further objection also to the present
The Bonds now offered as security proposal of the Bank. form a portion of a loan of £16,000,000 which the Hong Kong
and Shanghai Bank has undertaken in conjunction with certain German Banks. Of this amount about £5,000,000 was placed
in March last and the balance was offered to the public about a fortnight since but we understand that only about half the amount was placed and that the balance had to be taken by the guarantors, of which the Hong Kong and Shanghai Bank was the largest. The acceptance therefore of the proposal of the Bank would be to set free a large amount of its funds which are now locked up and to accept as part security for its note issue Bonds which have not been considered good enough by the public and the Stock Exchange
for their own purposes.
I beg to suggest that we should be authorised to inform the Bank that the Trustees regret that they do not feel able to accede to its present application and that they
2.
will
w
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