TNAG-0717-FCO40-914-Banking-and-monetary-matters-in-the-Dependent-Territories-is-1978 — Page 136

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9.4(4)

If we consider the position of the dependencies overall, it is evident that the total liability at end-1976 stood at about $35 mn.

Against this there is specific cover of only $2 mn., about 6%, and as has been noted, the liability is increasing.

9.4(5)

If there were substantial redemptions, some administrative action could be taken to mitigate the impact, as well be considered

below (Section 10). In some cases funds to meet redemption demands

will be available to the authorities concerned from sources other than

a specific backing, and this may meet (or help to meet) the requirement

for a time. Assets held to back other liabilities might be used in

the cases where there are currency authorities, eg in the Caymans and

the Solomons. But on the assumption that such resources were not

enough, the relative government would be involved. In the Caymans, for example, there is an explicit obligation on the Government to

provide funds to the Currency Board if its assets should not suffice

to meet its liabilities. Where there is no currency authority or currency fund, the liability is directly with governments. The total

of issues outstanding in this latter category is $15 mn. (Turks and

Caicos Islands, BVI, Falkland Islands and Gibraltar).

9.4(6)

The next stage is to assess HMG's contingent or indirect

liability. It would arise only if the government concerned could not

provide the funds for redemptions; but even if they could, the payments might leave them short of funds for other purposes and HMG might still

be committed to replenish then one way or another. It may be argued that no contingent liability exists; and possibly a dependency could

deny the right of a creditor to claim reimbursement from HMG. But it

is questionable whether, in practice, such a denial would have much

effect. Whatever the precise constitutional/legal position in each

case may be, it would seem hard to rebut the presumption that HMG is

responsible for the debts of its dependencies. Accordingly, if a dependency found itself unable to meet obligations deriving from its

numismatic coin issues, the international community would look to HMG.

Failure to provide the necessary funds would obviously be regarded

seriously. Indeed, it is possible that part of the success of the dependencies' coin issues so far has rested on the assumption, perhaps

sometimes unconscious, that HMG stands behind its dependencies. The actual degree of liability that can or should attach to HMG may well need study by legal experts.

9.4(7) However, as some of the dependencies covered by the survey achieve independence, HMG's contingent liability will decrease