TNAG-0379-FCO40-425-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 226

Mr Marshall

CONFIDENTIAL

25

:

HONG KONG STERLING AGREEMENT

then P.A.

Hong Kong telno 298 provides us with yet another example of the way in which the Hong Kong Government agreement with Hong Kong banks is creating problems for all concerned. Because of the contingent liabilities of the Hong Kong Government to the banks, they now want a suspense account which will only be a suspense account for as long as suits them.

2. I confess to a certain reluctance to accept that we have to accommodate ourselves to the convenience of the Hong Kong Government. Nevertheless I suppose that we could agree to an arrangement (which would have to be spelt out in a side letter) under which balances in the suspense, account standing to the credit of the Hong Kong Government could be drawn upon in the event that compensation payments to the banks by the Hong Kong Government fell to be made. For its part, the Hong Kong Government would have to agree that any reverse payments subsequently falling due would be paid to us even if the balance in the suspense account was insufficient to cover such payments. Such an arrangement need not, I think, raise m.f.n. problems, because Hong Kong's guarantee agreements with its banks are (happily) unique.

16 March 1973

cc Mr Stuart (HKIOD)

CONFIDENT IAL

D G Holland