9.
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Third is to be overdrawn in its clearing
account with the Settlement Bank and pay penal rates of interest at best lending rate for a pre-agreed sum and best lending rate plus three percentage points beyond that sum. This in practice is the most popular but also most expensive alternative, and perhaps rightly
so in
in view of the risks involved in what is basically passive, unsecured lending by the lender.
10.
It is the view of many banks that the scope
now exists within which licensed banks can make
adjustments to their liquidity positions may be a little
restrictive. One contributing factor is the fact that
the current practice of monetary operations by the Exchange Fund
Fund is to set the availability of interbank
liquidity, as measured by the Management Bank's clearing balance held with the Exchange Fund, at a fixed level. This level is varied only when there is a need to push interbank interest rates in
support the exchange rate.
arrangement for short term variations in the level order to cater for changes in the demand for interbank liquidity, other than the provision of late liquidity
assistance, which is not always forthcoming. As a result, when demand conditions do change in response
to, for example, month-end effects, Or a large share
issue, there would be wide fluctuations in interbank
interest rates, particularly those at the short end, with consequential adverse effects on the exchange rate.
particular direction to
There is по formal
level in
CONFIDENTIAL
P.7
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