TNAG-0717-FCO40-914-Banking-and-monetary-matters-in-the-Dependent-Territories-is-1978 — Page 21

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(f) Inclusion of bullion content as backing asset

A partial remedy to achieve the 100% backing would be to allow

for the inclusion, as an asset in the issuing authority's balance

sheet, of the bullion content of the coins. However, in the

case of those programmes which give most cause for concern the

bullion value is considerably lower than face value, and even

when combined with the accumulated royalties it would be

inadequate to provide full cover. Moreover, for this proposal

to be effective, accurate records would need to be maintained

detailing the numbers of coins minted with particular

specifications.

(g) Renunciation of redeemability

The

A radical course which would be a complete break with the

traditional style of currency issue in the dependencies.

immediate problem arising from this course would be its

implications for existing coins and for the rights of

convertibility/redemption attaching to them it would be

inequitable to remove existing rights without an adequate interim

period (see h below). However, on the assumption that existing

rights were unchanged and that the proposal applied only to

future issues, it would serve to limit (once for all) the risks

accepted by those issuing authorities that cannot or will not

maintain adequate backing. It could also relieve HMG from any

increase in its contingent liability. It does not imply that

currency authorities now adequately covered must adopt the new

arrangement; but it might well encourage some to make a change

in order to increase their income.

(h) Removal of legal tender status and demonetisation

This course would relate primarily to existing coin issues though

it would necessarily apply to future issues too. Its main

objective would be to limit convertibility/redeemability by