TNAG-0448-FCO40-513-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1974 — Page 35

:

CONFIDENTIAL

respectively and the Bank might have been expected to separate out part of the former to add to the .7m accrued interest and

£0.2m excess of receipts over payments.

19. The figures on the various alternatives are

$,000

OFFICIAL

10% deduction as bank

10% deduction as

STERLING

RESERVES

ELIGIBLE COMPENSATION

paragraph 15 above

ELIGIBLE COMPENSATION

BALANCES

BALANCES

As Bank Statement

298,736

260,322 9,795,

259,275

9,755

Additions to end-

February holdings

limited to end-

February

deficiency

296,600

258,186 9,714

257,139

9,675

(on basis of

78.8% MSP)

On actual

end-March

holdings 309,206

269,745 10,149

Even the limitation shown in the second line of the table is not a completely strict application of the modified settlement basis, since the purchases required need only offset the deficiency at transaction cost, not at end-March market values. However, I recommend that we pay compensation on eligible balances which lead to compensation in the range 9,675,000 to £9,755,000, that is applying the correct 10% deduction but allowing additions to end- February holdings at or above the full end-February deficiency depending upon weight given to the considerations in paragraph 17

above.

20. The table above gives £10,149.000 as the amount that would have been payable on actual end-March holdings. Alternative amounts of compensation are lower than this by the following

amounts