XN000022-1985-06-07 — Page 9

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FRAY, JUNE 7, 1985

+MRS CHOW COMMENTS IT IS ONLY 20 MONTHS SINCE THE HANG LUNG BILL, I AGREE. OF COURSE THE HANG LUNG BANK BILL WAS INTRODUCED IN SLIGHTLY DIFFERENT CIRCUMSTANCES. WE HAD A DEPLORABLE SITUATION WITH REGARD TO THE HONG KONG DOLLAR. THE PRESENCE OF POLITICAL LACK OF CONFIDENCE WAS PERFECTLY OBVIOUS. AND AT THAT TIME WE HAD NO OPTION. I AGREE THAT AT THIS TIME WE DID HAVE OPTIONS AND THINK ONLY FOOLISH PEOPLE WOULD BELIEVE THAT IT HAS BEEN EASY TO ADOPT THE COURSE WE HAVE. THERE ARE OTHER ARGUMENTS WHICH WERE VERY PERSUASIVE INDEED. I REPEAT WHAT I SAID EARLIER: I THINK WHAT WE HAVE DONE IS CHOOSE THE LESS BAD COURSE. CERTAINLY DON'T THINK IT IS A VERY GOOD COURSE. I AM SORRY THAT WE CANNOT QUANTIFY WITH A GREAT DEAL OF EXACTNESS THE COST TO THE EXCHANGE FUND, BUT IF WE HAD ALLOWED THIS BANK TO GO INTO LIQUIDATION IT HAS BEEN ESTIMATED VERY ROUGHLY THAT CREDITORS MIGHT HAVE RECOVERED ONLY ABOUT 70 PER CENT OF THE IR CLAIMS. IT HAS BEEN ACCEPTED THAT ALL SHAREHOLDERS FUNDS WOULD HAVE BEEN LOST.

+ON THAT BASIS, SIR, ESTIMATE THAT THE CONTRIBUTION FROM THE EXCHANGE FUND THAT MAY BE NEEDED TO HELP THIS BANK IS SOMETHING LIKE $2 BILLION. GIVEN GOOD MANAGEMENT, THE FINAL FIGURE MAY BE LESS. I NEED HARDLY REPEAT THAT IT IS NOT THE GOVERNMENT'S INTENTION ANY MORE THAT IT WAS THE INTENTION WITH THE HANG LUNG BANK TO HANG ON TO DISTRESSED BANKS. I SHALL PERSONALLY BE DELIGHTED TO SEE THE BACK OF THEM AND I AM SURE THE MEMBERS OF THIS COUNCIL WHO SERVE ON THE BOARD AND WILL CERTAINLY SHORTLY SERVE ON THE BOARD OF THIS BANK WILL ALSO BE DELIGHTED TO SEE US GET OUT. THE ONLY POINT IS THIS REPRESENTS AGAIN THE MONEY OF THE CITIZENS OF HONG KONG AND IT IS ONLY INTELLIGENT TO MAKE SURE THAT WHEN WE DO SELL THE BANK WE GET OUR TIMING RIGHT SO THAT WE CAN SECURE AS MUCH COMPENSATION AS WE CAN.

MRS FAN AGAIN REFERRED TO THE HANG LUNG CASE. WE THOUGHT AT THE TIME IT WAS A ONE OFF, WE WERE WRONG. SHE ASKED AGAIN TO PROMISE THERE WILL BE NO SIMILAR BILLS, OF COURSE I CANNOT. BUT WHAT I CAN SAY, AND I ECHO ONLY THE WORDS OF MANY OF MY COLLEAGUES: IF ANY BANK THINKS IN FUTURE IT GETS INTO TROUBLE IT'S GOING TO GET AN EASY PASSAGE EITHER FROM THE EXECUTIVE COUNCIL OR THIS COUNCIL, IT IS SERIOUSLY MISJUDGING NOT ONLY THE MOOD OF THIS CHAMBER BUT WOULD GUESS THE MOOD OF THE PUBLIC AS WELL.

MR CHAM, PERFECTLY CORRECTLY, POINTED TO THE SQUEEZE THAT COULD HAVE HAPPENED IN HONG KONG. I MUST CONFESS FRANKLY THAT THIS TO ME IS ALL PERSUASIVE. IF WE HADN'T TAKEN THIS COURSE I DO NOT KNOW WHAT WOULD HAVE HAPPENED AS EARLY AS NEXT WEEK FOR A LOT OF OUR SMALLER BANKS.

/NOW THIS