TNAG-0379-FCO40-425-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 58

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(i) H.M.G. have throughout emphasised that there would be no

question of compulsion and the banks would be free to

take up such paper on a voluntary basis;

(ii) this implies

(a) a rate of interest on such paper not too far

below the yield at present earned by the banks

on their sterling assets. (However, since the

sterling accruing in this way would be employed

in London by the Hong Kong Government they would

have the income necessary to pay such a rate of

interest.)

(b) a lender of last resort, and, pending fundamental

banking reform, this would probably have to be

the Accountant General. [As (a) above foresees

an attractive yield a secondary market would be

likely to emerge and lender of last resort

Why? -The bauling

system managed to satisfacting

ий

new starch wher

pheavals

facilities might, ceteris paribus, not need to

be used all that frequently.]

(iii) at some time, if a Monetary Authority is set up, a judgment

might need to be made of the appropriate foreign exchange

dealing limits for the banks thus creaming off all of their

"excess holdings". However, apart from the absence of

exchange control in Hong Kong which would complicate the

issue, it is premature to try to make such a judgement

now and in any event it would not be consistent with the

principle of the voluntary purchase of paper by the banks;

(iv) were it not for the Sterling Agreement situation the local

paper/lender of last resort question would fall to be

investigated by an expert mission on the spot in the

context of general banking reform,

Thus any earlier

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