On the substance of the problem, the Governor said that the differences between the FCO and the Treasury effectively amounted to only £11 million, spread over six years. While our theoretical exposure to contingent liabilities under sterling safeguards might amount to very large sums. he did not believe that anyone saw a serious likelihood of the collapse of the Hong Kong dollar to the point where we would have to stump up the sums mentioned in the letter. Not since 1967 had the Hong Kong dollar been as weak as HK $16:1.
After the meeting, the Prime Minister said that he agreed with the Governor both that we needed a speedy solution, and that this ideally was not a matter which needed to be settled at Cabinet level. He therefore asked if you could arrange for the Cabinet Office to look into the problem with officials of the Departments concerned, and could recommend an appropriate solution.
Primir Lyno
RODERIC LYNE
16 April 1993
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