TNAG-2528-FCO40-3698-Proposed-acquisition-of-Midland-Bank-by-the-Hongkong-and-Sha-1992 — Page 2

HKC 121/3

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Thank you, letter, cleared with

to PS/ Chancellor

FROM: R A Burns

DATE: 4 March 1992

Me Ricketts

CC:

9/ü

PS/Lord Caithness PS/PUS

Sir J Coles

you,

о

Private Secretary

CALL ON THE SECRETARY OF STATE ON 5 MARCH: GALLEY/QUARTERDECK

1. Mr Cox's brief covers most of the ground in a way likely to be acceptable to the Treasury. It is possible that the Treasury may send some further briefing of their own over night.

He

2. The main purpose of this meeting is to allow Mr Purves to give the Secretary of State a full personal account of how he views Galley's present position and future prospects (he gave a pretty frank account to the Chinese on Monday): why he considers it important to proceed with the bid for Quarterdeck: and the effect he fears if it becomes known that the Bank of England have cold feet on prudential grounds. will be particularly interested to know whether at a political level Ministers realise the difficulties faced by Galley and what attitude they take to a solution involving the UK, though he will not be looking for precise answers.

3. Mr Purves will have come from meetings with the Bank of England, Quarterdeck, and possibly Sailmaker. He is clearly very suspicious of the Bank of England, and believes that they are creating artificial delaying tactics in order to forestall awkward decisions about his bid for Quarterdeck as opposed to Sailmaker's. His supicions will have been reinforced by the news he has just passed on to the Governor of Hong Kong, that Sailmaker are likely to announce publicly tomorrow a bid to take over Quarterdeck. He believes that the Quarterdeck Board have come under very strong pressure from the Bank of England to accept this offer. He believes that they may not do so immediately, but will be under intense pressure over the next day or two to declare their position. If this is accurate, he will feel that he has been shabbily treated by the Bank of England. Our advice to him through the Governor, agreed with the Treasury, has been that any bid from Sailmaker would take time to be considered by the UK authorities, and that Mr Purves should not therefore regard the prospect of such a bid as putting him under time pressure to take action either with Quarterdeck or with the Chinese before the Bank of England have been able to form a view on his proposals.

4. I passed on this latest information to the Treasury this afternoon. The Deputy Secretary there sought the Chancellor

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