1988-07-15 16:22 MONETARY AFFAIRS BRANCH.
852 5 865 6146 P.06
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account, either with HSBC, the Management Bank of the Clearing House of HKAB, or with a Settlement Bank (as defined in Rules relating to the Clearing House of HKAB) which in turn maintains an account with HSBC, for the purpose of clearing Hong Kong dollar cheques and for settling interbank transactions denominated in Hong Kong dollars. Banks with surplus Hong Kong dollar balances on their clearing accounts lend those funds, through the interbank market, to banks which are short of funds. Deposit-taking companies and large corporate customers also make use of the interbank market, but settlement is effected through their accounts with licensed bankɛ. Interbank interest rates are determined by the forces of supply and demand for funds in that market.
4.
At present, HSBC, as the Management Bank of the Clearing House, does not itself have a clearing account. Settlement of Hong Kong dollar transactions between HSBC and other banks are effected through HSBC crediting or debiting, as the case may be, the clearing accounts maintained by these banks or by their Settlement Banks with HSBC. The Exchange Fund is a customer of HSBC and of a number of other banks. These existing arrangements have certain consequences on how the supply of money in the interbank market is determined and how interbank interest rates behave. Specifically, the supply of Hong Kong dollars in the interbank market increases and interbank interest rates ease when:
(a)
(b)
(c)
HSBC buys foreign currency or other assets from another bank, or from customers banking with another bank, with Hong Kong dollars; or
HSBC lends Hong Kong dollars in the interbank market; or
a customer of HSBC pays Hong Kong dollars from his account with, or credit facility made available by, HSBC to another person banking with another bank.
Similarly, the supply of Hong Kong dollars in the interbank market decreases and interbank interest rates firm when:
(a)
(b)
HSBC sells foreign currency or other assets to another bank, or to customers banking with another bank, for Hong Kong dollars; or
HSBC borrows Hong Kong dollars in the interbank market; or