TNAG-0765-FCO40-969-Minting-of-coins-for-Hong-Kong-1978 — Page 41

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not only to redeem both notes and coins on demand, but also to retain perpetual liability for currency not handed in after it may have ceased

to be legal tender.

8.13 (8) Section 4 (i) of the Cayman Islands Currency Law, 1974, (as

amended) states that:

"There shall continue to be established, on the entry into

force of this Law, a Currency Fund, into which shall be paid, and upon which shall be charged, all amounts respectively

due to and payable by the Board or the Fund under the

provisions of this Law."

Because all notes and coins (which under Section 13 of the Law are

redeemable on demand) constitute a liability of the Board, this

provision has been interpreted (as was the original intention) to

imply that 100% backing should be maintained in the Currency Fund.

Further, as there is no separate provision for numismatic coins, it

is also implicit in the Law that the Fund should cover such coins.

However, the Board has made no provision in its balance sheet for numismatic coins except to the extent that all payments received in

respect of royalties are reflected in a separate liability account

(while the corresponding assets are not distinguishable from the Board's

other assets). It is thus failing to comply with the Law - the very size of the issues ($13.66 mn. at end-1976) and the comparatively small royalty receipts (14% of face value) virtually preclude this.

The Cayman Islands Government, which under Section 9 of the Law is

liable for any excess of the Board's liabilities over its assets, appreciates the situation. Untypically, Cayman currency may be

declared to be no longer legal tender without prior notice being

given, but only subject to the condition that the holder "shall be

entitled at any time after they (ie notes or coins) have ceased to be

legal tender to claim payment of the value thereof from the Board".

8.13(9) The Bermuda Monetary Authority Act, 1969, (as amended), provides a further variation. There is no explicit requirement for the Monetary Authority to redeem coins at all: the sections concerning

the redemption of currency on demand by the public, and the maintenance

of 100% backing make reference only to notes. None the less, there is

a requirement to exchange at face value for a limited period both notes

and coins called in by the Authority. Beyond whatever time limit is

specified the Authority may, at its discretion, exchange cancelled notes and coins for a further ten years. Accordingly, the Authority considers itself liable, and does in fact make provision in its balance