TNAG-0379-FCO40-425-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 217

CYPHER/CAT A

CONFIDENTIAL

box

PARED IN

ROSLARY NO.47

15 MAR 1973

|MF9|393/1

8

FM HONG KONG 160608Z

CONFIDENTIAL [ORWELL]

TO ROUTINE F C O TELNO 298 OF 16TH MARCH, 1973.

YOUR TELEGRAM 228: STERLING GUARANTEE AGREEMENT.

HONG KONG' STERLING BALANCES ARE OWNED BY LOCAL BANKS AND A NUMBER OF SEPARATE GOVERNMENT FUNDS. HAVING ONCE CREDITED THOSE FUNDS WITH AN APPROPRIATE SHARE OF ANY STERLING ADJUSTMENT PAYMENTS RECEIVED FROM U.K. IT WOULD, APART FROM THE EXCHANGE FUND, BE AWKWARD TO ARRANGE FOR REVERSE PAYMENTS. IT IS MAINLY FOR THIS

REASON THAT WE HAVE OPTED FOR THE SUSPENSE ACCOUNT ARRANGEMENT.

BUT BEFORE DECIDING WE WISHED TO BE SURE THAT, IF NECESSARY, IT WOULD BE POSSIBLE FOR THE MONEY ON THIS ACCOUNT TO BE USED IN PART OR WHOLE FOR COMPENSATION PAYMENTS TO THE BANKS. FOR IF

THIS WAS NOT POSSIBLE WE WOULD THEN BE FORCED TO SELL BRITISH

GOVERNMENT SECURITIES, POSSIBLY ON A SUBDUED MARKET, TO PROVIDE CASH FOR SUCH PAYMENTS TO AN EXTENT WHICH WOULD NOT BE NECESSARY

IF THE DIRECT PAYMENT VARIANT HAD BEEN ADOPTED.

MACLEHOSE

ORWELL DISTRIBUTION

FRD

HKIOD

CONFIDENTIAL

+.