TNAG-0379-FCO40-425-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 60

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would then be reduced to cover a lower percentage than 75% of the

banks' sterling. Naturally under this arrangement the Government's

holdings would increase but would be covered 100% by the guarantee.

Time, however, is short and it follows that it will be

necessary for an early decision to be taken whether to offer such a

special arrangement to Hong Kong where the Government would need to

make preparations, inter alia, for the printing of short-term paper

in advance of the first issue on 25th September. There would also

nood to be prior consultation with the banks to negotiate the technical

details including the rate of interest to be offered. If this time

limit could not be met, and an affirmative decision had been taken by

H.M.G., it would probably be necessary to offer a 100% guarantee of

both the Government's and the banks' sterling for a strictly limited

period pending the introduction of the linked guarantee scheme.

1st August 1973

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