TNAG-1950-FCO40-2778-Hong-Kong-Exchange-Fund-1989 — Page 11

108g/mg1.pa O'MARA (812)

HM Treasury

CONFIDENTIAL

DIEG

(ET MON)

Frank Holroyd Esq

Hong Kong Department

HKC 105/1

Foreign and Commonwealth Office

London

SW1A 2AH

Parliament Street

London SW1P 3AG 699 Telephone 01 270

33

10 July 1989

Dear Mr Holroyd

HONG KONG:

EXCHANGE FUND ORDINANCE

I promised last week to confirm in writing my response to Hong Kong tel no 1453.

15

I have now seen Mr Gannon's legal advice on whether the Financial Secretary is empowered to borrow unsecured and am content with the explanation he gives. I accept that there is no need for a separate limit on unsecured borrowing.

should

I am also content that the borrowing limit in Section 3(3) not be revised down, on the basis that the current limit represents a rather smaller proportion of the total assets of the Exchange Fund and of annual general revenue than it did when fixed in 1972. Given this rationale, I, like Chris Elston, have some sympathy for expressing the limit in future in terms of a fixed proportion either of the Fund and/or the general revenue but I agree we need not amend it now and that we should not seek to

alter the offending wording of Section 3(3) in isolation.

I am copying this letter to Chris Elston in the Bank of England.

Yours sinceres

Margaret O'hara

MISS M O'MARA

CONFIDENTIAL

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