TNAG-0210-FCO40-246-Briefs-and-background-notes-for-visit-of-Deputy-Under-Secret-1969 — Page 86

CONFIDENTIAL

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4.

There is no doubt that the proposed procedure would be simpler and quicker. On the other hand we have encountered legal difficulties because the Royal Instructions require that any Bill affecting the currency of the Colony needs the concurrence of the Secretary of State. But it is our intention to agree to the Governor's request with the statutory proviso that only the Governor himself may propose such a resolution and the further condition that the Governor is required to obtain the consent of the Secretary of State before he proposes the resolution. We are waiting until certain other difficulties between the Treasury and the Colonial Government relating to the sterling guarantee have been resolved before telling the Governor this. By special arrangement the sterling guarantee is extended to sterling held by the Hong Kong Exchange Fund with the Commercial Banks provided that 70% of Her Majesty's Government's liability is continually covered by counterpart sterling deposits in London. But there is still some disagree- ment (which looks like being resolved very soon) with Hong Kong over the question of consultation if the counterpart deposits fall below the agreed level.

5. This is a highly technical subject and if it should be raised (as it may be by the Financial Secretary) we suggest that Sir Leslie Monson says only that he understands that the proposal that the borrowing limits of the Exchange Fund should be increased by LegCo resolution is likely to be agreed before

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