TNAG-1271-FCO40-1621-Financial-policy-in-Hong-Kong-1983 — Page 8

SECRET

112

See HKK O26/2

(1984)

HKK

18317

RECEIVED IN REGISTRY

DD 300100Z HONG KONG

GRS 476

SECRET

DESKBY 300100Z

FM FCO 291430Z DEC 83

TO IMMEDIATE HONG KONG

TELEGRAM NUMBER 1398 OF 29 DECEMBER

STRICTLY PERSONAL FOR GOVERNOR FROM CLIFT

FINANCIAL CONTINGENCY PLANNING

1.

DESK OFFICER

3 - JAN 1984

TREGISTRY

INDEX

PA

Action Tire}

NO 4

DOUGLAS BLYE WILL OF COURSE HAVE REPORTED TO YOU ALREADY ON

HIS DISCUSSIONS WITH THE TREASURY AND BANK OF ENGLAND. THE

TREASURY HAVE SINCE BEEN DOING FURTHER THINKING, FOR

LITTLER HAS WRITTEN TO THE PUS SUGGESTING A NUMBER OF MATTERS WHICH SHOULD BE GIVEN FURTHER CONSIDERATION.

2.

LITTLER RAISES THE POSSIBILITY THAT, WERE FINANCIAL CONDITIONS IN HONG KONG TO DETERIORATE SERIOUSLY, FOR INSTANCE AS A RESULT OF A TURN FOR THE WORSE IN THE TALKS, THE HONG KONG AUTHORITIES MIGHT BE DRAWN INTO CONSIDERING MORE

EXTENSIVE SUPPORT OPERATIONS FOR HONG KONG BANKS. THE TREASURY AND THE BANK OF ENGLAND ARE WORRIED ABOUT POSSIBLE CONTINGENT

FINANCIAL LIABILITY.

3. THE TREASURY REALISE THAT THE RIGHT COURSE OF ACTION ON ANY

PARTICULAR CASE COULD WELL DEPEND ON CIRCUMSTANCES. BUT IN

LITTLER'S VIEW WE SHOULD NOT SIMPLY AWAIT EVENTS. THE TREASURY

ARE ASKING FOR A NUMBER OF POINTS TO BE ESTABLISHED AND AGREED WITH YOU AS SOON AS POSSIBLE.

4.

FIRSTLY THEY NOTE THAT BLYE SAID THAT HE HOPED TO PUT IN

HAND A FACTUAL ANALYSIS OF THE DEGREE OF EXPOSURE OF DIFFERENT

HONG KONG BANKS. THE TREASURY STRONGLY SUPPORT THIS. (THEY WERE CONCERNED BY A SUGGESTION BY BLYE THAT IN THE WORST CASE, IF A

SUBSTANTIAL PORTION OF THE PROPERTY SECTOR IN HONG KONG WERE TO COLLAPSE, SOME FORM OF SUPPORT MIGHT HAVE TO BE CONSIDERED FOR THE HONG KONG AND SHANGHAI BANK). THEY WOULD BE GRATEFUL TO KNOW THE RESULT OF BLYE'S RESEARCH AS SOON AS POSSIBLE.

POSSIBLE.

5. SECONDLY THE TREASURY SUGGEST THAT THERE SHOULD BE A CLEAR

1

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UNDERSTANDING ABOUT PROCEDURES FOR CONSULTATION AND AGREEMENT

BEFORE HEAVY COMMITMENTS FOR FINANCIAL LIABILITY ARE ENTERED

INTO BY THE HONG KONG AUTHORITY. THEY REALISE THE NEED TO

PRESERVE YOUR POSITION AS GOVERNOR, BUT THEY POINT

OUT THAT ACTIONS AND STATEMENTS IN HONG KONG MIGHT IN SOME

CIRCUMSTANCES COMMIT UK GOVERNMENT RESOURCES.

6.

THIRDLY THE TREASURY WOULD LIKE A CHANCE TO EXPLORE, WITH US

AND YOU, THE KINDS OF CONTINGENCIES WHICH MIGHT ARISE AND WHICH

WOULD PROMPT CONSIDERATION OF GOVERNMENT SUPPORT. THEY SUGGEST

THAT WE SHOULD ATTEMPT TO DEFINE AND WHERE APPROPRIATE LIMIT THE

FORM AND EXTENT OF ANY SUPPORT WHICH MIGHT BE CONSIDERED.

7. LITTLER HAS ASKED TO HAVE A WORD WITH THE PUS ABOUT THIS

EARLY IN THE NEW YEAR BUT THEREAFTER HAS SUGGESTED A DISCUSSION

WITH YOU WHEN YOU ARE IN LONDON BETWEEN 12 AND 18 JANUARY. IT

WOULD BE VERY HELPFUL TO HAVE YOUR VIEWS INCLUDING ANY

PRELIMINARY COMMENTS WHICH MIGHT BE HELPFUL FOR THE PUS WHEN HE

SEES LITTLER NEXT WEEK.

8. INDEPENDENTLY, THE BANK OF ENGLAND HAVE ASKED WHETHER YOU

WOULD BE FREE TO SEE THE GOVERNOR, PREFERABLY ON 13 JANUARY. WE

HAVE UNDERTAKEN, SUBJECT TO YOUR VIEWS, TO SEE WHAT COULD BE FITTED

IN TO THE TIME-TABLE.

HOWE

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Reference...

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For Folio (110) see

see Annexe

2/1

KEBL