TNAG-0747-FCO40-951-Visits-of-Foreign-and-Commonwealth-officials-to-Hong-Kong-1978 — Page 123

6

IDENT CAL; UK EIES A

in the long term without a Central Bank which has the

following functions:

a) managing the exchange rate and official reserves

b) managing the domestic money supply

c) lender of last resort (banker to the commercial banks)

d)

banker to the Government

e) regulator of financial markets

f) supplier of domestic liquid assets

g)

revenue gainer (from increases in the money supply).

15. The Hong Kong Exchange Fund has now been brought under the control of a 'Monetary Authority' which does not, however, perform functions a)-g) above as a Central Bank should. It would be interesting to know what the Financial Secretary envisages as the next stage in Banking policy. Macau will have a central bank from June this year.

Mark Hall

31 March 1978

Mark Hull

CONFIDENTIAL: UK EYES A