XN000022-1983-05-25 — Page 25

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WEDNESDAY, MAY 25, 1983

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+EVEN THOUGH THE INTERVENTION HAS UNDOUBTEDLY SUCCEEDED AT TIMES IN THE OBJECTIVE OF INFLUENCING THE EXCHANGE RATE, ALBEIT INDIRECTLY, THERE HAVE BEEN DOUBTS AS TO WHETHER THE OPERATIONS INVOLVED FALL UNQUESTIONABLY WITHIN THE DEFINED PURPOSE OF THE EXCHANGE FUND WHICH IS TO REGULATE THE EXCHANGE VALUE OF THE CURRENCY OF HONG KONG,+ MR BLYE SAID, IN MOVING THE SECOND READING OF THE EXCHANGE FUND (AMENDMENT) BILL 1983.

THE MAIN PURPOSE OF THE BILL, HE EXPLAINED, IS TO MODERNISE CERTAIN PROVISIONS IN THE EXCHANGE FUND ORDINANCE SO AS TO GIVE CLEAR LEGAL AUTHORITY FOR CERTAIN EXISTING PRACTICES.

THE PROPOSED AMENDMENT TO SECTION 3(1) OF THE ORDINANCE WOULD PUT THE PROPRIETY OF THIS TYPE OF INTERVENTION BEYOND DOUBT, HE SAID.

ON OTHER PROVISIONS OF THE BILL, MR BLYE NOTED THAT WHEN BANK NOTES ARE ISSUED, A CERTIFICATE OF INDEBTEDNESS IS ISSUED AS COVER FOR THESE NOTES AND THE NOTE-ISSUING BANK IS REQUIRED TO PAY TO THE EXCHANGE FUND A SUM EQUIVALENT TO THE FACE VLAUE OF THE CERTIFICATE.

AT PRESENT. THE ORDINANCE REQUIRES THAT THESE SUMS SHOULD BE HELD EXCLUSIVELY FOR THE REDEMPTION OF THE BANK NOTES.

THIS WOULD REQUIRE THE ASSETS BACKING THE NOTE ISSUE TO BE MANAGED SEPARATELY, WHEREAS IN PRACTICE ALL ASSETS OF THE FUND ARE MANAGED AS ONE POOL.

+A PROPOSAL IS NOW MADE TO AMEND THE ORDINANCE IN ORDER TO GIVE FORMAL BACKING TO EXISTING PRACTICE,+ MR BLYE SAID.

AS COINS AND NOTES SERVE SIMILAR MONETARY FUNCTIONS, THERE IS NO REASON WHY THE ASSETS BACKING THE COIN ISSUE SHOULD BE SEPARATED FROM AND EMPLOYED IN A DIFFERENT MANNER TO THOSE BACKING THE NOTE ISSUE, MR BLYE SAID.

+ IT IS PROPOSED, THEREFORE, TO AMEND THE ORDINANCE TO ALLOW ALL REVENUE AND EXPENDITURE RELATING TO THE ISSUE, MAINTENANCE, AND RETIREMENT OF COINAGE IN HONG KONG TO BE CREDITED OR CHARGÉD TO THE EXCHANGE FUND.

+THIS PROPOSAL REFLECTS CURRENT PRACTICE AND PARALLELS THE ACCOUNTING TREATMENT OR REVENUE AND EXPENDITURE ARISING FROM THE NOTE ISSUE,+ HE SAID.

THE BILL ALSO PROPOSES THAT CERTAIN POWERS NOW HELD BY THE SECRETARY OF STATE SHOULD BE TRANSFERRED TO EITHER THE GOVERNOR OR THE FINANCIAL SECRETARY,

THUS, AUTHORITY RELATING TO THE AUDIT OF THE FUND WOULD LIE WITH THE GOVERNOR, AND AUTHORITY FOR THE APPOINTMENT OF STAFF EMPLOYED IN CONNECTION WITH THE PURPOSES OF THE FUND WITH THE FINANCIAL SECRETARY, MR BLYE EXPLAINED.

+THE PROPOSED AMENDMENTS IN THE BILL HAVE NO IMPLICATIONS FOR THE MANAGEMENT AND CONTROL OF THE ASSETS AND LIABILITIES OF THE EXCHANGE FUND, WHICH, AND EMPHASISE THIS, CONTINUE TO REST ENTIRELY WITH THE HONG KONG GOVERNMENT, HE SAID.

DEBATE ON THE BILL WAS ADJOURNED.