TNAG-0717-FCO40-914-Banking-and-monetary-matters-in-the-Dependent-Territories-is-1978 — Page 12

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Foreign and Commonwealth Office London SW1A 2AH

Telephone 01- 233-4381

All Officers Administering

Governments (OAGs)

British Dependent Overseas Territories

Your reference

Our reference

Date

HKG 102/1

22 May 1978

HKG 102/1

RECEIVE #

TARY NO. 51

2 4 MAY 1978

DESK OFFICER

INDEX

REGISTRY

PA

Action Taken

Dear Governor / Commissioner

Yes.

ISSUE OF NUMISMATIC COINS IN THE DEPENDENT

1. As certain OAGS will be already aware, the Bank of England last year conducted a survey of the numismatic coin programmes in Lependent Territories. This survey was launched as a result of fears that in certain Territories such programmes were getting out of hand; since the coins represent a sub- stantial contingent liability for HMG, it was felt timely to review the situation and consider whether there was a need to introduce tighter controls.

It

2. The Bank finally produced their report in January. is a lengthy, highly technical document, and includes information that was provided by certain Territories in confidence. We are not, therefore, giving it general circulation: however, you may find helpful the attached summary. I should, however, say from the start that we have considerable reservations about the underlying assumption that current practices constitute some sort of a problem for us. Certainly, there is a danger that if the market for such coins were to collapse and they were all to be sent back to their countries of origin for redemption, certain Territories could be in serious difficulties: the survey found that only 6% of the coins in circulation had specific cover. In theory, this does face us with the horrifying prospect of having to pick up the tab for a bill of many millions of pounds.

3. But this situation would only arise if the entire market for numismatic coins collapsed so comprehensively that the value of the coins fell well below their nominal value, so that the only economic thing to do would be to cash them in at face value - and even this ignores the fact that many collectors collect coins out of interest and not primarily as an investment, and would not therefore want to send all their coins back simply because their market value fell. Such a collapse is inconceivable (except as a minor repercussion of a serious world-wide slump) - but even if the inconceivable

/happened,

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