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Re: Private banking

Suresh Anand wrote:

> My response:
> I could be wrong but to my knowledge the currency board only controls the
> exchange rate and the perhaps controls the total currency to be issued; i
> think the board has monetary authority (which is govt.) and banks(private)
> participation.

Yes, the govt fixes the foreign currency value of the domestic money,
then in some cases the govt itself issues currency (likes in a central
banking system) but stands ready convert in the foreign currency at the
specified rate, or allows private banks to issue currency with the same
requirement of redemption.

> Bank of China does issue currency since early 1997. i have notes
> issued by the bank in my wallet!

Well, this shows that I haven't kept up with the changes.  I wrote my
dissertation on HK's banking system.

> Again, i have no first hand knowledge,  but i believe banks with certain
> minimum capital, and strong base in Hong Kong are permitted to issue notes.
> Only Hong Kong Bank and Chartered Bank meet this criteria. Bank of China
> has been permitted mainly for political reasons. i have to repeat however
> that i am talking only off the cuff.

At least until the early 1990s, only two banks by name were permitted to
issue currency.  No provision for anyone else to get into that
business.  In reality the multiple issue of HK notes is irrelevant since
they both trade at par and always have.parth-

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