CONFIDENTIAL
FM HONG KONG
TO IMMEDIATE FCO
TELNO 2483
OF 09065OZ AUGUST 90
CONFIDENTIAL
HKE 020/26
RECT
0
39
051002
MDHIAN 2537
PERSONAL FOR MARSDEN FROM ACTING GOVERNOR
58)
YOUR TELNO 1508 : POSSIBLE DISPOSALS IN HONG KONG BEFORE IMPLEMENTATION OF THE FREEZE
1. OUR REASONS FOR THINKING THAT THERE WERE PROBLEMS REGARDING THE STATUS OF KIO STEM FROM AN EXCHANGE BETWEEN THE ACTING FINANCIAL SECRETARY AND THE BANK OF ENGLAND LAST MONDAY (A.M. LONDON TIME P.M. HONG KONG TIME). WE HAD LEARNT FROM A LOCAL BANK, DAO HENG BANK, THAT THEY HAD RECEIVED INSTRUCTIONS FROM THE KIO LONDON TO TRANSFER SECURITIES TO HSBC (PRESUMABLY AS A RESULT OF SALES HAVING TAKEN PLACE THE PREVIOUS FRIDAY) AND TO TRANSFER A VERY LARGE SUM TO BANKS IN SWITZERLAND. WE HAD SUGGESTED TO THEM THAT THEY COULD PROPERLY CABLE THE KIO IN LONDON ASKING FOR CONFIRMATION THAT BANK OF ENGLAND AUTHORITY HAD BEEN GIVEN FOR THE INSTRUCTIONS. WE UNDERSTAND THAT THE INSTRUCTIONS CAME FROM THE CHAIRMAN OF THE KIO IN LONDON AND, AFTER TAKING LEGAL ADVICE, DAO HENG BANK TOLD US THAT THEY HAD NO OPTION BUT TO CARRY OUT THE INSTRUCTIONS. ON HEARING THIS, ACTING FINANCIAL SECRETARY RANG THE BANK OF ENGLAND AND EXPLAINED THE FULL CIRCUMSTANCES TO THEM, ALSO MENTIONING THAT WE HAD HEARD OF SEVERAL OTHER CASES WHERE BROKERS HERE HAD RECEIVED SALE INSTRUCTIONS FROM THE KIO THAT DAY. THEIR RESPONSE WAS TO SAY THAT IT LOOK AS IF THE TRANSACTIONS WOULD HAVE TO GO THROUGH AND WE SO TOLD DAO HENG BANK. WE HAD ASSUMED THAT THE REASON WHY THE BANK OF ENGLAND HAD FELT UNABLE TO TAKE ANY ACTION WAS BECAUSE KIO WERE NOT ACTING IN
BREACH OF THE FREEZE ORDER.
FORD
YYYY
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