11.
CONFIDENTIAL
6
of
In view of this, it seems desirable to allow some short term variations in the availability interbank liquidity, perhaps around a trend level, in response to short term variations in its demand. In doing so, not only would the scope for banks to adjust their liquidity position be enhanced, the short term interbank interest rate for the Hong
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
therefore, that the Exchange Fund should modify and formalize the existing arrangements for
for late liquidity assistance through the establishment of a Liquidity Adjustment
a Liquidity Adjustment Facility (LAF) as follows:
and if
(a) After the close of the interbank market,
from 4 pm to 5 pm on weekdays,
necessary from 11.30. ап to 12 noon Оп Saturday, the Exchange Fund would make available overnight Hong Kong dollar liquidity to licensed banks at an offer
rate determined and announced in advance by the Exchange Fund.
(b) This overnight Hong Kong dollar liquidity would be offered generally to licensed banks on a secured basis, with Exchange Fund Bills, Hong Kong Government Bonds and other assets acceptable to the Exchange Fund as security.
CONFIDENTIAL
P.9