TNAG-0717-FCO40-914-Banking-and-monetary-matters-in-the-Dependent-Territories-is-1978 — Page 54

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holders of local currency to convert into external

currency has at times been restricted by exchange

control measures, the underlying principle of

automatic convertability, for a small commission or

charge, has remained. Notes have always, and coins

have increasingly, been tokens, with little or no

intrinsic value, and thus the value of the "backing"

assets into which they could be converted has been

Normal practice has been to legislate

important.

for 100% backing for local currency in liquid and/or

marketable assets in a specified external currency.

Often the physical currency is included as

one form

of liability in the wider category of the

"demand liabilities" of the issuing authority

along with deposits that may be placed with the

issuing authority. Subject to cautiously-worded

provisions a facility is often also given for a

proportion of thebacking to be held in specified

local securities: so long as there is redeemability

in an external currency this facility must

stobviously

belimited, though it is normally safe to assume that

a "hard core" of a local currency will always remain

in circulation.

(iv) Certain developments in the. Caribbean

and Pacific areas had revealed the vulnerability of

some local administrations when confronted with the

high pressure sales techniques adopted by some coin

promotion companies. The UK Overseas Territories off

attractive outlets through which companies could

supply the fast-growing market for new coins and

there was also a degree of exploitation of the

dependencies "royal" connection.