VACKMENT HOUSE HONG KONG.
*** TUE 15 SEP 92.09186
PG.82
HongkongBank
The Hongkong and Shanghai Banking Corporation Limited
Head Office: 1 Queen's Road Centzat,
Kong
JM Gray
Chief Executive and Deputy Chi
STRICTLY PRIVATE & CONFIDENTIAL
11th September 1992
The Hon. E.B. Wiggham, C.B.E., J.P., Secretary for the Civil Service, Government Secretariat,
Lower Albert Road,
Hong Kong.
Your Ref (47) in CSB-5/8 VI
Das Barry,
PENSION SAFEGUARDS
ses
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 schème- would in practice....be- feasible. The declared in- tention of the scheme is to safeguard the sterling value of the commuted pension but the scheme» itself has the following
drawbacks:
1. There would be an immediate exchange risk, both
bocn for the bank and for the borrower. To protect itself against this exchange risk the bank would. have to call for margin. Given the sort of swings-in ene-Gar/und excuemyu- kete have seen this year the initial margin would probably have- to be around 10%, and this-the- officer would have to pay from his own: resources.
2. As long as-the- GBP/XKD. exchange- rate continued.to appre- ciate therem would: be- no- needs to. increase the initial margin. If it began to: depreciates however: the- margin would. need to: bew toppada: up... andı hers=again: the officer: would- have- to: do= this= fromm: hiam ovn« resources. I needs. hardly remind: your thats although: GBâshas»been very" strong÷recent- ly, thereiss no: quacantes=that=it: will remains strong: over: a period:as-long-aa»five=YOGES
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