FO371-46252 — Page 98

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1.

RE-OPENING OF BANKS IN HONGKONG

(a) On the re-occupation of Hongkong the British Government as representing the returning sovereign and the military administration in force pending the restoration of civil government will be concerned with the rescinding of illegal acts of the Japanese occupant and with the establishment of law and order, the restoration of confidence amongst the inhabitants and the revival as specdily as possible of the economic and financial life of the Colony. Amongst the first tasks in this connection will undoubted- ly be the re-opening of banks, the restoration and regulation of currency, and the announcement to the inhabitants of the first measures adopted for the conduct of financial transactions. The Civil Affairs Administration will undoubtedly have its plans for the regulation of finance banking and currency, but it is suggested that it may be of assistance to submit in outline a draft of proposals for such initial logislation as may be within the powers of the administration.

(b)

(i)

History of the Banks under Japanese Occupation.

(ii)

(iii)

(iv)

As far as can be discoverod, the facts are as follows:

Seizure of Banks. After the occupation of Hongkong on Christmas Day 1941, Japanese armed forces took possession of most of the foreign banks, including the three British and two Amorican banks, took over their buildings and sealod all safes and strong-rooms.

Liquidation. It was thon announced by the Japanese Military Finance Department that the foreign (non-Chinese) banks (except the Banque de l'Indo Chine) would be liquidated, and the Yokohama Specio Bank and the Bank of Taiwan were appointed Liquidators. Some months later

the Bank of China, Bank of Communications and Bank of Canton were also put into liquidation, leaving to carry on business only the Bank of East Asia and the Ovcrsoas Chincso Bank which may be undor suspicion of unduc collaboration. It is, therefore, evident that tho Japanoso carried out a policy of liquidating the main banking institutions of the Colony.

Scizurc of Funds The Japanese Military Finance Department immodiately claimed all Government funds and inter bank deposits, scized all cash balances, and by force compelled the issuc of and illegally put into circulation notos of cortain banks of issue without prior compliance with statutory conditions.

Payments to Depositors. From the reports availablo it appears that the following facts as to the measures taken by the Japanese apply approximately to all banks in liquidation. From the opening under the control of tho liquidators on January 29, 1942, Chinese and neutral dopositors were allowed to withdraw their deposits by instalments of $50, $150 and $300 up to a total of $500 cach, and in Junc 1942 they wore allowed to withdraw up to 20% of the balanco due to them on current account and on Savings Bank and Fixod Doposits. Those withdrawals were allowed uniformly from all the banks in liquidation whether or not each bank had sufficient cash balance to meet the claims of its own dopositors. The Japanoso had pooled all the cash balances and placed them under the control of the Military Financo Department and the liquidators provided cach bank from the pool with funds to moot demands without consulting the banks or furnishing

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