TNAG-1259-FCO40-1599-The-Future-of-Hong-Kong---special-study-by-FCO--August-1982--1983 — Page 110

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powers of control, both executive and legislative.

2.

Hong Kong has no central bank, but normal central

banking functions are undertaken through the Monetary

Affairs Branch of the Government Secretariat and by the

Commissioner of Banking, with appropriate assistance from

the Hong Kong and Shanghai Banking Corporation (HSBC),

which is, for example, the major note issuing bank.

3.

Currency notes are issued by HSBC and the Chartered

Bank under specific local ordinances and the Royal Charter

of the Chartered Bank. Apart from small fiduciary issues

(totalling HK$95 million) which are backed by securities

issued or guaranteed by the United Kingdom or Hong Kong

governments, issues of currency have to be backed by

interest-free certificates of indebtedness purchased from

the Exchange Fund. The Fund in turn invests the proceeds

either in foreign currencies or in Hong Kong dollars (as

deposits with the banks). The Fund is required to maintain

assets equal to 105% of its liabilities in respect of

certificates of indebtedness, but there is no requirement

for a specific proportion to be covered by foreign assets.

The profits of the note issue accrue to the Fund. Coins

are issued by the government and are also backed by assets

held with the Exchange Fund. As at end-1981, total notes

and coins in circulation amounted to HK$12.3 billion. The

Queen's head is used on coins and the armorial bearings

(in whole or in part) on notes.

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/4.