VERMENT HOUSE HONG KONG.
TUE 15 SEP 92 09:06
PG.82
HongkongBank
The Hongkong and Shanghai Banking Corporation Limited
Head Office: 1 Queen's Road Centrai, Hong Kong
copies
Me
ch arh ODA
Me Morris
ملات
JM Gray
Chief Executive and Deputy Chairman
STRICTLY PRIVATE & CONFIDENTIAL
11th September 1992
The Hon. E.B. Wiggham, C.B.E., J.P., Secretary tor the Civil Service, Government Secretariat,
Lower Albert Road,
Hong Kong.
Your Ref (47) in CSB-S/8 VI
awas Barry
14
PENSION SAFEGUARDS
ses
me.
Thank you for your letter dated 4th September asking for my views on an alternative loan scheme, to that referred to in my letter dated 17th August.
I would have to say that I do not think that this alternative loan scheme would in practice .be feasible. The declared in- tention of the scheme is to
is to safeguard the sterling value of the commuted pension but the scheme itself has the following
drawbacks:
che
1. There would be an immediate exchange risk, both for
bank and for the borrower. To protect itself against this
would the bank
have to call for margin. exchange risk
Given the sort of swings in the Gur/ako excuauye have seen this year the initial margin would probably hav to be around 10%, and tnia. the officer would have from his own resources.
2. As long as the GBP/HKD exchange rate continued .to appre- clate there would. be- no need to increase the initial margin. If it began: to. depreciate nowever the margin would need to be- topped. up, and: here- again. the› officer would have to do: this: froma: his« own^ resources. I need: hardly remind you that, although: GB2a has-been: very strong recent- ly, there is... no guarantee-that: it. will remain strong over· a period, as long as fire"yestsu
3. Although" GBP» deposit-rates-are-presently higher than HKD- lending: races thereris, agadn« nos quarantee, that: this situ—- ations will last ovec: a» five-year period. Shoulda ar... reverser itself them offi vill. havem tor beat the interest rater differe
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