ADVANCE COPIES
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FUTURE OF HONGKONG
PS
PS/PUS
PS/MR LUCE
MR DONALD
HD/HKD
HD/FED
RESIDENT CLERK
ADVANCE COPY
IMMEDIATE
DESKRY 0308007
10017
HKK
17
20 OCT 1983
STAY
Taken
GRS 450
INDEX
CONFIDENTIAL
DESKEY FCO 03088OZ
FM HONG KONG 030520Z OCT 63
TO #MMED KATE F C O
TELEGRAM NUMBER 1459 OF 3 OCTOBER
AND TO IMMEDIATE HONG KONG GOVERNMENT OFFICE LONDON
FOR CLIFT (HONG KONG AND GENERAL DEPARTMENT) FRON BREMRIDGE:
PROBLEMS IN THE BANKING SECTOR.
THE SUN HUNG KAN BANK IS NOW A WHOLLY-OWNED SUBSIDIARY OF SUN HUNG KA AND CO. WITH THE NEW SHARES OF THE LATTER BEING QUOTED TODAY FOR THE FIRST TANE ON THE STOCK EXCHANGES.
2. THE BANK'S ASSETS BASE HAS BEEN CLEANED UP.
FOR THE PAST WEEK HOWEVER THERE HAS BEEN A HAEMORRHAGE OF DEPOSITS AS THEY MATURE, WITH WITHDRAWALS AVERAGING ABOUT DOLLARS 100 MILLION PER DAY. NO BANK CAN LONG WITHSTAND SUCH PRESSURE.
3. HERRILL LYNCH AND PARIBAS (AFTER CONSULTATIONS AT CHAIRMAN
LEVEL IN NEW YORK IN WHICH SANDBERG OF THE HONG KONG AND SHANGHAI
BANK WAS ALSO PERIPHERALLY HNVOLVED) HAVE THEREFORE INCREASED THEIR
SHAREHOLDING IN SUN HUNG KAM, AND CO. TO 51 PER CENT. THEY HAVE
INJECTED HK DOLLARS 80 MILLION JAN NEW FUNDS AND WILL DIRECT THE
BANK'S MANAGEMENT. NR FUNG KING HOT (WHOSE SHAREHOLDING FALLS
TO 26.8 PER CENT) WILL CONTINUE AS CHAIRMAN AND HAS PERSONALLY
SUBSCRIBED DOLLARS 120 MILLION IN 7 YEAR SUBORDINATED NOTES WHICH
WILL GO THROUGH TO SUN HUNG KAT BANK.
CONSEQUENTLY LATTER HAS RECEIVED AN INJECTION OF DOLLARS 200
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