TNAG-2471-FCO40-3595-Confidential-talks-between-the-UK-and-China-regarding-financ-1992 — Page 76

CONFIDENTIAL

2.-

5.

In the situation when a licensed bank in Hong Kong is experiencing problems affecting its solvency, there is no, and there cannot be, clear cut lender of

last resort policy. *Each case is different and must

be handled on an ad hoc basis". These were the exact

words used by the then Financial Secretary Sir John Bremridge on 9 April 1986 in a speech in the Legislative

· Council concerning Exchange Fund and banking

banking issues.

The Government's attitude remains the same and it will be useful to have the relevant excerpt repeated here:

"Each case is different and must be handled. on an ad hoc basis. No banker and certainly

no shareholder- in a local bank should be:

lulled into an imprudent belief that if he

gets into trouble Exchange Fund support is

inevitable. A judgement. must be made in

and it is the interests of

depositors, not those of shareholders,

directors

managers of banks which must

each case,

-

Or

take priority. This judgement also has to take into account possible ripple effects. One day and the sooner the better there

will not be support for a. small bank in trouble. We will be ruthless in this regard

provided that it does not result in serious

damage to the prosperity and stability of

Hong Kong. We have all

all along taken this approach to the problems of DTC's.

There is no precedent. Each case stands on its own. My message is clear and will. I hope be understood."

CONFIDENTIAL

PEST