Sessional_Paper_1930 — Page 123

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Reservations by the Hon. Dr. R. H. Kotewall, C.M.G., LL.D.

I have signed this report with two reservations :

A.-Currency Advisory Board.

1. In paragraph 21 of the report alternative suggestions for the better control of the Colony's note-issue are mentioned. They are (a) that the Government should take over the note-issue, and (b) that it should exercise a more direct control over the note-issuing banks than it does at present. Arguments are given in paragraphs 21 and 22 to refute the first suggestion, but no reasons are advanced against the second which seems to me to be of such importance as to merit serious consideration.

2. In paragraph 16 of my memorandum I express the view that, while No. 33 in the first alternative seems, for reasons, given therein, unwise and unnecessary,

Part III, the

Page 94. fact that it has been suggested by such important organisation and local residents as the Chinese Bankers' Association, the Chinese General Chamber of Commerce, the Hon. Mr. J. J. Paterson and Mr. R. M. Dyer, C.B.E., indicates that there is a widespread desire on the part of the Public that the Government should not altogether dissociate itself from the control of the note-issue of the Colony.

3. Many business men and bankers consider-and I agree with them-that the present system lays too great and too grave a responsibility upon the managers. of the three note-issuing banks. Of these the Hong Kong and Shanghai Banking Corporation, by virtue of its premier position in China, and of the special privilege it enjoys in being allowed by law to issue notes in excess of the statutory limit to any amount under certain specified conditions, exercises the greatest power; and consequently it is upon its Chief Manager that the heaviest responsibility lies in a time of financial crisis. This means that in such a time the welfare of the Colony largely hangs upon the decision of one man. On one or two occasions in the past the Public has asked itself whether the action or inaction of the Bank in the matter of note-issue was to the best interests of the Colony as a whole. The Public has the right to expect that the note-issue, upon which the prosperity of the Colony depends to so great an extent, should not be subject to the will of one single individual. At the present moment Hong Kong is fortunate in having at the head of its chief bank a man of large vision, but it requires to be safeguarded against the man of narrow views, who may at another time occupy the same position. In other words, we trust the man in power to-day, but we mistrust the system that confers a position of such power. It may be interesting to note that in paragraph 29 of the report, the Committee expresses the view that "admittedly the power of note-issue possessed by banks involves a serious responsibility on their part to Government, which represents the interests of the Public.

4. Sharing this view, and in the absence of other schemes for a better control of the note-issue, I recommend the establishment of an Advisory Board that could in a time of financial crisis advise the Government (and, incidentally, the note-issuing banks) what steps should be taken to meet the situation. The fact that the Colony would then be prepared for an emergency by the existence of a body of experts (some of whom at least would be disinterested and independent parties) ready to study any problem and explore all avenues for remedial measures, would be sufficient justification for my recommendation.

5. I should mention that the proposal to institute this Board has the support of two other members of the Committee.

6. In view of my recommendation, I am unable to subscribe to the view expressed in the last sentence of paragraph 29-"The Public would thus be ade- quately safeguarded"-unless it is modified by the addition of the words: "but in the opinion of three members of the Committee, the establishment of an Advisory Board is necessary for full security."