CONFIDENTIAL
7
(c) The Exchange Fund would retain the existing
arrangement to extend late liquidity
assistance selectively to banks on an
unsecured
basis.
As
at
present,
availability of such assistance is not assured. When given, it would be on terms
determined at the absolute discretion
of the Exchange Fund and subject to prudent credit limits assigned by the Exchange
Fund.
13.
·
(d) In order to channel funds to those in
need, the Exchange Fund would at the same
time bid for any overnight surplus liquidity that licensed banks may wish
to offer, at a bid rate determined and
announced in advance by the Exchange Fund.
as
(e) As LAF is intended to be of a last resort
nature, and to discourage the use of LAF alternative for prudent management by licensed banks of its Hong Kong dollar
liquidity, through suitably making use
of the interbank market, the Exchange
Fund's bid and offer rates for overnight
liquidity would have a suitably wide
spread.
It is hoped that LAF will go some way to meeting the needs
the needs of licensed banks in their prudent
in their
management of liquidity. This does not affect the existing arrangements between the Exchange Fund and
the Management Bank, the Settlement Banks and
Sub-Settlement Banks, and the Clearing Facilities of the Clearing House of the Hong Kong Association of Banks.
CONFIDENTIAL
P.9