TNAG-0448-FCO40-513-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1974 — Page 112

PRIORITY

CYPHER/CAT A

FM FCO 191020Z

CONFIDENTIAL

ORWELL

CONFIDENTIAL

RECEIVED IN REGISTRY No. 51

11 APR 1974

Spoken. My Sterant (HKIOD)

we

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Milouté

54

You do not appear to (MF 9/393/1)

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TO PRIORITY HONG KONG TEL NO 357 OF 10 APRIL. 295

YOUR TELS NOS 396 AND 406: STERLING GUARANTEE.

197

LAST

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have seen

145

53

Ms. Mr."/4

49

1. WE ARE SORRY TO CEE FROM THE RECENT EXCHANCE OF TELEGRAMS THAT

THE SIX MONTH ARRANGEMENT SHOULD SEEMINGLY HAVE COME TO AN END ON

A NOTE OF DISCORD.

2. WE DO FIND IT A LITTLE DIFFICULT TO SEE HOW THE RELEVANT

PROVISION LENDS ITSELF TO YOUR INTERPRETATION. YOU APPEAR TO

REGARD ANY BREACH RESULTING FROM A FALL IN THE PRICE OF GILTS AS

ACCIDENTAL BY DEFINITION EVEN IF IT COULD HAVE BEEN FORESEEN AND

AVOIDED EITHER BY THE MAINTENANCE OF A MARGIN ABOVE MSP/MSH OR

PURHCASES IN ADVANCE. WE REGARD AN ACCIDENTAL BREACH AS ONE RESULTING FROM CIRCUMSTANCES WHICH COULD NOT HAVE BEEN REASONABLY

FORESEEN OR PRUDENTLY PROVIDED AGAINST, SUCH AS A SUBSTANTIAL FALL

IN GILT PRICES IN THE LAST DAYS OF THE MONTH. NEVERTHELESS WE DO

NOT, OF COURSE, DOUBT YOUR GOOD FAITH AND WE APPRECIATE THE CIRCUMSTANCES IN WHICH YOU HAVE HAD TO OPERATE AND THAT

(UNJUSTIFIED) CRITICIS MAY WELL ARISE LOCALLY WHEN YOUR TOPPING-UP

PRUCHASES BECOME KNOWL.

3. ALTHOUGH YOU INDICATE RIGHTLY THAT THE POINT OF THE QUARANTEE

HAS BEEN TO INSULATE THE RATE AGAINST PRESSURE FROM SWITCHING OUT.

THE FACT IS THAT ANY GUARANTEE REQUIRES A SPECIFICATION OF

CONDITIONS, AND YOU WILL APPRECIATE THAT AS A MATTER OF

ACCOUNTABILITY WE HAVE TO SATISFY OURSELVES THAT SUCH CONDITIONS

HAVE BEEN FULLY MET, THIS IS WHY OUR TELEGRAMS. INDICATED THAT WE..

WERE NOT ABLE ENTIRELY TO DISREGARD THE FACT THAT THE HONG KONG

POSITION WAS SOMEWHAT BELOW 100% SATISFACTION OF THESE CONDITIONS

ON THREE SUCCESSIVE MONTHLY REPORTING DATES.

CONFIDENTIAL

/4. WE WOULD OF