6731P
16015
Ms Carma Elliot
Hong Kong Department
Foreign & Commonwealth Office
King Charles Street
London
SW1A 2AH
Dear Ms Chot,
BANK OF ENGLAND Threadneedle Street
London
EC2R 8AH
15 May 1988
EXCHANGE FUND ORDINANCE
You asked for my views on Hong Kong telegram No 1453 on 8 May. short, I have no difficulties with what it contains.
In
On whether the Financial Secretary is legally empowered to borrow unsecured, I bow to the lawyers' advice contained in Gannon's memo of 5 May.
I go along with the Hong Kong view that it is not necessary to have a separate limit on unsecured borrowing. This really springs from the point that I made in paragraph 6 of my letter of 3 April to Peter Morris that such lending is at the risk of the lender, and as Hong Kong telegram No 1453 points out in paragraph 2, each lender will have his own prudent limit based on his judgment of the credit-worthiness of the Exchange Fund. One factor in such a judgment will be the overall proportion of the Exchange Fund's assets (which are not published) which can be at any one time charged against secured borrowing, ie the existing limit of HK$50 bn. The higher this proportion is, the less credit-worthy the Exchange Fund will therefore presumably seem to an unsecured borrower.
No comments yet.
Private notes are available after approval.