CO129-482 - Public Offices - 1923 — Page 760

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entitled to issue notes up to the amount of their paid up capital against the deposit of securities, and so far as present issues are concerned, on

Moreover, as the somewhat more favourable terma. Secretary of State is aware, the Corporation have also increased their authorised capital to $50,000,000, and in the event of a part of that capital being called up My Lords apprehend that the Colonial Government would support the Corporation in an application to increase the

limits of their issue against securities, a course to which They would probably not raise

objection.

Turning now to the contention of the Hong Kong Government that the grant of the new Supplemental Charter to the Chartered Bank introduces an entirely new principle in respect of note issues in Hong Kong, My Lords refer to the terms of the Treasury letter of the 21st September,

In that letter 1894 quoted by that Government.

Reas

Their Predecessors stated their conviction that in communities of mixed nationalities where the population is to a great extent uneducated, and

when, therefore

panio may be especially apprehended,

a/

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a note issue should be absolutely secured and immediately

convertible, But They also recorded Their view that

such perfection could only be attained by means of a

State issue, the State alone being in a position to

issue notes without regard to profit. For reasons

with which the Secretary of State will be familiar

Buggestions for a Government issue have not been

favourably entertained at Hong Kong.

In the case of issues by a private Bank the said

letter laid down the principle that the entire

responsibility of keeping the reserve of coin necessary

to meet its notes should be left to the issuing Bank,

and that deposits of security in coin should not be

required.

This principle, with which My Lords are in

entire agreement, has been consistently followed in the case of the authorised ordinary issues of both the

Chartered Bank and the Hong Kong and Shanghai Banking

Corporation. The implication, in the Hong Kong

Government's despatch that the principle has been superseded appears to arise from the fact that in the case of excess iegues deposit in coin or bullion has been required. It is obviously desirable that more stringent conditions should apply when issues are

allowed/

TODAY