CO129-472 - Others - 1921 — Page 144

:

OPY.

F.2866.

Treasury Chambers.

141

19th May, 1921.

course we should be prepared to lodge the additional security as required by our Charter.

I have the honour to be,

Your Lordships' most obedient Servant,

L

*(Sgd)

Secretary.

sir.

I have laid before the Lords Commissioners of His Majesty's Treasury Hr. Grindle's letter of the 4th instant, with enclosures regarding a proposed extension of the powers of the Hongkong and Shanghai Banking Corporation.

In reply I am to request you to inform the Secretary of State for the Colonies that My Lords are in general agreement with his views. While They see no objection to the proposed increase of the authorised capital of the bank They entirely concur as to the inadvisability of any extension of the bank's note issue on the terms of one Third Security. Their predecessors in agreeing to an arrangement on those terms were influenced in part by the consideration that before that time there had been no guarantee fund specifically allocated to the Notes and in part by the unlimited liability imposed upon the shareholders. But that liability is not an adequate substitute for tangible security and with the growth of the bank's business y Lords hold the requirement of full security to be even more important now than when (in 1907) a similar proposal was refused by Lord Elgin and the then Board of Treasury,

As regards the proposal that local reserves should be taken into account in reckoning the security held My Lords see no objection in principle to a proportion of the security being held at places other than Hongkong where notes are issued. From the practical point of view it seems to Them that it should be possible to secure that changes in the holdings should be notified promptly to Hongkong. But the question of the safety of such deposits is more serious and They would suggest that in the first instance the Foreign Office might be consulted on this point. They are Themselves inclined to take the view that only

reserves held at certain accessible points such as Shanghai and e Under-Secretary of State,

Colonial Office,

Tientsin