XN000022-1973-12-15 — Page 2

Saturday, December 15, 1973

HONG KONG AND U.K. REACH UNDERSTANDING ON STERLING BALANCES

A. Government spokesman announced today that the British and

Hong Kong governments have now reached an understanding under which

Hong Kong will participate in arrangements for the guarantee of its

sterling balances during the six months ending March 31, 1974.

Commenting on this announcement the Financial Secretary, Mr..C.P.

Haddon-Cave, said that the agreement was in respect of official sterling

holdings and was satisfactory to both sides.

It was the result of detailed discussions extending over some

months. These discussions were concerned with the application to Hong

Kong of the unilateral offer made by the British Government in September

last to guarantee eligible sterling balances at a rate of United Statca

Dollars 2.4213 to one pound sterling for a period from September 25, 1973 to

March 31, 1974.

The present guarantee, Mr. Haddon-Cave added, will be confined to

official, i.e. Government's holdings of sterling. The coverage of the

previous Five-Year Sterling Guarantee Agreement was exceptional in that

the Hong Kong Government brought the sterling holdings of local banks

under the umbrella of the agreement.

The exclusion of the banks from the new arrangement brings the

position of Hong Kong into line with that of other sterling holders and

reflects the fact that the sterling holdings of local banks are no longer

judged to be sufficient to warrant their inclusion.

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