11.
CONFIDENTIAL
· 6
of this, it seems desirable to allow variations in the availability of
In view of this,
term short
some
interbank liquidity,
a
its
demand.
In
term
perhaps around trend level, in
to short tcrm variations in Lesponse doing so, not only would the scope for banks to adjust
enhanced, the short their liquidity position be interbank interest rate for the Hong Kong dollar would also become more stable and the adverse effect hitherto seen in the exchange rate be minimized.
Liquidity Adjustment Facility (LAF)
12.
It is proposed, therefore, that the Exchange Fund should modify and formalize the existing arrangements for late liquidity assistance through the establishment of a Liquidity Adjustment Facility (LAF)
as follows:
and
if
to 12 noon on
(a) After the close of the interbank market,
from 4 pm to 5 pm
on weekdays,
from 11.30 am necessary
the Exchange Fund Saturday, available overnight Hong Kong dollar
liquidity to licensed banks
would make
at an offer
rate determined and announced in advance by the Exchange Fund.
banks
on
(b) This overnight Hong Kong dollar liquidity would be offered generally to licensed with Exchange secured basis, a
Fund Bills, Hong Kong Government Bonds and other assets acceptable to the Exchange
Fund as security.
CONFIDENTIAL.
P.8