CONFIDENTIAL
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THE SPECIAL FEATURE OF THE UK 'S STERLING AGREEMENT WITH HER IS...
EVIDENTLY LIMITED TO THE EXTENT WHICH HER SPECIAL CIRCUMSTANCES
JUSTIFY.
6. IT WAS AGAINST THIS BACKGROUND THAT WE PROPOSED TO COWPERTHWAITE THAT WE WOULD ABONDON THE LIMIT ON THE FUNDS TAKEN INTO THE EXCHANGE FUND PROVIDED THAT ABOVE A LIMIT TO BE AGREED OFFICIAL STERLING WAS HELD DIRECTLY IN LONDON, COMPERTHWAIT IS CONSIDERING
THIS PROPOSAL.
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7. THIS PROPOSAL MAY DO LITTLE TO MITIGATE ONE OF OUR MAIN POINTS OF CONCERN, VIZ. THE FACT THAT THE HONG KONG COMMERCIAL BANKS HAVE AN INTEREST RATE INCENTIVE TO TAKE NON-RESIDENT DEPOSITS. WHILE WE MAY NOT BE ABLE TO ACHIEVE THIS FULLY, WE ARE SEEKING A SOLUTION WHICH WILL ENABLE US TO DEFEND BOTH TO THE OS A AND PUBLICLY, THE SPECIAL FEATURE OF OUR ARRANGEMENTS WITH HONG KONG. BECUASE OF THIS WE SHALL NEED TO LOOK CLOSELY AT THE RATIONALE OF COMPERTHWAIT'S RESPONSE TO OUR PROPOSAL.
STEWART
FILES
F.P.A.D.
H.K.D.
CONFIDENTIAL
20
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