TNAG-1034-FCO40-1284-Visits-by-non-officials-from-Hong-Kong-to-the-UK-1981 — Page 54

CONFIDENTIAL

THE LORD PRIVY SEAL'S MEETING WITH THE CHAIRMAN OF THE HONGKONG AND SHANGHAI BANKING CORPORATION

BID FOR THE ROYAL BANK OF SCOTLAND:

ESSENTIAL FACTS

1. Both Standard Chartered Bank (SCB) and Hongkong and Shanghai Bank

(HKSB) have made bids for the Royal Bank of Scotland (RBS).

bid has been endorsed by the RBS's shareholders.

Neither

On 1 May Secretary of

State for Trade referred both bids to Monopolies and Mergers Commission

which will report in the New Year.

2.

Bank of England is concerned about HKSB bid on three counts:

a)

HKSB is not registered in Britain, but in Hong Kong;

b)

Bank of England is doubtful of degree of supervision of the HKSB

exercised by Hong Kong Government;

c)

3.

Our

doubts about Hong Kong's long-term political and economic future. FCO takes no position on commercial merits of rival bids. concern is that HKSB should not be singled out for discrimination on grounds that it is 'non-British'. (HKSB is 'British' by virtue of its

Also need to avoid any

registration in a Dependent Territory.) suggestion that HKSB, or indeed Hong Kong itself, has an uncertain future. Rejection of HKSB bid on such grounds would damage already strained UK/Hong Kong relations and possibly prejudice UK prospects to

win major contracts in the Territory.

4.

Question of supervision of HKSB is for Bank of England and Hong Kong Government to settle. Sir Philip Haddon-Cave, Hong Kong Chief Secretary

designate, gave evidence before Monopolies Commission in August.

Hong Kong and General Department

7 October 1981

CONFIDENTIAL