THE Bank of China is gaining a lot of prestige by joining the Hongkong Bank and the Standard Chartered in issuing Hong Kong dollars but it will not be without some cost.
There is a cost to all the issuing banks in foregoing interest on the US dollars they need to lodge with the Exchange Fund in order to issue Hong Kong currency.
The expense of buying the paper stock and printing the notes will be covered by the Government but associated costs such as distribution and destruction will be covered by the bank.
Sorting and checking the notes each time they pass through the bank is made easier by modern equipment but the machinery is expensive, according to bankers.
Hongkong Bank senior manager, operations and services, Ray Morgan said of banks' note issuing infrastructure: ''It is expensive to set up and can be expensive to operate. A bank with a network our size would need it anyway, but it is not something every organisation would want to do.'' Another banker said the symbolic importance of the Bank of China's involvement in issuing Hong Kong currency far outweighed the expenses.
''From the Bank of China's point of view, it is a very significant step. It is the first time they have issued notes that I am aware of and it is a recognition of their importance in Hongkong.'' The Bank of China reportedly intends printing up to $6 billion in Hong Kong bank notes but the amount actually issued will depend on demand.
