CO129-359 - Governor Sir Lugard - 1909 [12] — Page 423

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would only aggravate the evil complained of. My desire, on the contrary, is so materially to widen, under all

necessary safeguards, the privilege of Bank Note Issue as to destroy the premium value attaching to the Notes and to remove the unnatural advantage they at present enjoy over all legal tender coin. The continuance of a monopoly that is unfair in its operation, and the fostering of conditions that place the legal tender coin of His Majesty's Colonial Government at a disadvantage cannot be the desire of the Supreme Government such conditions being the result of the limitation of the right of Note-Issue to two only of the British Banks who thereby in effect levy a tax on all the financial interests in the Colony from the Government itself down to the smallest tradesman. In my last advices from Hongkong I find the difference in current value between

the legal tender coin of the Colony and the Notes of the Banks enjoying the right of issue had risen to 3% in favour

of the latter. I urge there cannot in justice be a denial on the grounds laid down in the letter to myself from the Under Secretary of State for the Colonies dated 23rd June

1899, a copy of which I recently forwarded to you, of similar

privileges of Note-issue to The Mercantile Bank of India,

Ltd., and I believe that this extension of the Note Issue would of itself substantially reduce, if not altogether destroy, the anomalous premium already referred to.

As an alternative I have already urged the assump- tion by the Government of the Colony of Hongkong of the responsibilities of the paper currency, and on this point the views of the Government of Hongkong might be sought by Their Lordships.

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