XN000022-1985-10-02 — Page 7

WEDNESDAY, OCTOBER 2, 1985

CENTRAL BANK FUNCTIONS ALREADY COVERED BLYE

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THE SECRETARY FOR MONETARY AFFAIRS, MR DOUGLAS BLYE TODAY EXPLAINED WHY HE DID NOT FAVOUR SETTING UP A CENTRAL BANK, IN A SPEECH ON HONG KONG'S MONETARY SYSTEM HE GAVE TO THE ANNUAL CONFERENCE OF HONG KONG MANAGEMENT ASSOCIATION.

+MANY OF THE PRINCIPAL FUNCTIONS OF A CENTRAL BANK ARE CLEARLY ADEQUATELY COVERED ALREADY BY ONE PART OF THE HONG KONG SYSTEM OR ANOTHER; AND TO CREATE A CENTRAL BANK OR OTHER NEW AUTHORITY OF SOME KIND WOULD NOT ONLY PROVOKE A GREAT DEAL OF DISRUPTION BUT MORE IMPORTANTLY COULD HINDER HONG KONG'S ECONOMIC DEVELOPMENT, + HE SAID.

MR BLYE POINTED OUT THAT AN ECONOMY LIKE HONG KONG'S REQUIRED US TO BE VERY QUICK ON OUR FEET AND NOT TO GIVE EXCESSIVE WEIGHT TO MONETARY ISSUES. WITH OUR COMPLETE LACK OF NATURAL RESOURCES AND DEPENDENCE ON TRADE, +POLICIES IN THE ECONOMIC, FINANCIAL AND MONETARY AREAS NEED TO BE CO-ORDINATED CENTRALLY TO A DEGREE WHICH IS POSSIBLY NOT NECESSARY IN OTHER PLACES.

I BELIEVE THAT THIS CO-ORDINATION WOULD BE HINDERED WERE A CENTRAL BANK TO BE SET UP,+ HE SAID.

HE REFERRED TO A RECENT ARTICLE IN THE LLOYDS BANK REVIEW WHICH SUGGESTED THAT THE VARIOUS FUNCTIONS OF A CENTRAL BANK COULD PROBABLY BE PERFORMED BY A VARIETY OF PUBLIC AND PRIVATE INSTITUTIONS. +THIS,+ MR BLYE NOTED, IS THE HONG KONG PATTERN.+

HE ADDED THAT THE NOTE ISSUING BANKS IN HONG KONG WERE THE PRIVATE INSTITUTIONS THAT PLAYED SOME OF THE CENTRAL BANK FUNCTIONS. SOME OTHER FUNCTIONS WERE ALSO BEING SATISFACTORILY PERFORMED WITHIN HONG KONG'S EXISTING MONETARY SYSTEM, THROUGH THE EXCHANGE FUND AND THROUGH THE WORK OF THE MONETARY AFFAIRS BRANCH AND THE COMMISSIONER OF BANKING AND THE COMMISSIONER OF DEPOSIT-TAKING COMPANIES.

ON THE FUNCTIONS OF THE EXCHANGE FUND, MR BLYE SAID IT PLAYED A VERY IMPORTANT ROLE IN THE MONETARY SYSTÉM, GENERALLY AS A VEHICLE FOR THE CONDUCT OF MONETARY POLICY.

MORE SPECIFICALLY, THE EXCHANGE FUND, AS DEFINED IN THE EXCHANGE FUND ORDINANCÉ, IS +USED FOR SUCH PURPOSES AS THE FINANCIAL SECRETARY THINKS FIT AFFECTING, EITHER DIRECTLY OR

IND IRECTLY THE EXCHANGE VALUE OF THE CURRENCY OF HONG KONG AND FOR OTHER PURPOSES INCIDENTAL THERETO.+ IT IS ALSO GOVERNMENT'S INVESTMENT MANAGER, MANAGING THE BULK OF GOVERNMENT'S FINANCIAL ASSETS, MR BLYE SAID.

/+ITS LIABILITIES ....