CO129-492 - Governor Sir Clementi - 1925 [12] - 1926 [1-5] — Page 63

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59

£

51868

sum had been lent it became necessary to decide how to finance further loans, and I have now agreed to accept the proposals of the Hongkong and Shanghai Banking Corporation as set forth in their letter and memorandum of the 15th October, copies of which were enclosed in my Confidential despatch of the 16th October.

4.

The chief difficulties in financing such a

loan are to avoid losses in exchange on the conversion of gold into silver and vice versa and also any cost in minting or purchase and subsequent sale of dollar coins. Both the Hongkong and Shanghai Banking Corporation and the Chartered Bank have to keep in reserve actual dollar coins to the extent of of their note issue. The average note

circulation and actual coin in reserve of the three Banks

was on December 31st, 1925 as follows:-

Hongkong and

Shanghai

Banking

Corporation.

$42,326,964.

Coin in Reserve.

Limit of Issue

$33,500,000

$100,500,000

Note Issua

on condition of

1/3 in coin.

5.

Chartered Bank of India, Australia

and China.

$14,504,352.

Mercantile Bank of India.

$1,459,872.

$ 5,000,000. $ 550,000

$15,000,000

$1,650,000

The Hongkong and Shanghai Banking Corporation are also importing $2,000,000 in coins minted at the Royal Mint.

It is therefore obvious that the Hongkong and Shanghai Banking Corporation can expand their note issue to a very considerable extent without the necessity of further coinage and importation of silver dollars, while the other

two Banks have almost reached the limit of note issue; and

it is also apparent that in concluding the arrangement with

the Hongkong and Shanghai Banking Corporation for financing

the loan up to $15,000,000 there is no reasonable cause to

expect