32
GRS 350
CONFIDENTIAL
FM HONG KONG
CONFIDENTIAL
TO PRIORITY HONG KONG GOVERNMENT OFFICE LONDON
TELNO 343
OF 110715Z APRIL 86
INFO PRIORITY HKGO NEW YORK, HKGO BRUSSELS, HKGO WASHINGTON INFO PRIORITY HKGO GENEVA, UKMIS GENEVA, FCO
HKG/GT/123: THE EXCHANGE FUND AND BANKING ISSUES.
THERE WAS EXTENSIVE MEDIA COVERAGE OF THE FINANCIAL SECRETARY'S STATEMENT HIN THE LEGISLATIVE COUNCIL ON 9 APRIL 1986 ON THE EXCHANGE FUND AND BANKING HISSUES. THE FULL TEXT HAS ALREADY BEEN
SENT TO YOU BY FASCHMILE.
LINE TO TAKE.
2. YOU MAY DRAW FREELY UPON THE FOLLOWING ADDITIONAL POINTS :
(A) THE EXCHANGE FUND'S RESOURCES REMAIN SUBSTANTIAL AND INDEED HAVE GROWN CONSIDERABLY OVER THE YEARS DESPITE RECENT BANK RESCUES.
(B) THE UTILIZATION OF THE EXCHANGE FUND TO SUPPORT BANKS S BY NO MEANS AUTOMATIC. EACH CASE STANDS ON HITS OWN. IT DEPENDS ON THE FINANCIAL SECRETARY'S CONSIDERATION OF THE CONSEQUENCES OF THE USE OR THE FANLURE TO USE THE FUND - WHETHER THEY MAY AFFECT, EH THER DIRECTLY OR INDIRECTLY, THE EXCHANGE VALUE OF THE HONG KONG DOLLAR.
(C) MT HIS NOT GOVERNMENT POLICY TO DISCLOSE THE SIZE OF THE EXCHANGE FUND OR THE AFFAIRS OF INDIVIDUAL BANKS. THE LATTER MS GOVERNED BY
STRICT SECRECY PROVISIONS IN THE BANKING LEGISLATION.
(D) HONG KONG'S ATTRACTION AS AN INTERNATIONAL FINANCIAL CENTRE REMAINS UNDIMINISHED. THERE IS A CONSTANT STREAM OF FOREIGN BANKS AND FINANCIAL INSTITUTIONS COMING HERE OR EXPRESSING
INTEREST TO COME HERE.
(E) THERE HAS BEEN NO PANIC AT ALL ON THE COMMUNITY ABOUT GOVERNMENT'S RECENT ACTION TO TAKE OVER THE MANAGEMENT OF THE UNION BANK, NOR ABOUT REVELATION OF GOVERNMENT'S SUPPORT OF THE
KA WAH BANK.
CONFIDENTIAL
\(F).
HKK 10211
RECEIVED IN REGISTRY
1 4 APR 1986
JATUY
Takeu
AB 14/4.
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