XN000022-1994-03-07 — Page 4

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LIQUIDITY ADJUSTMENT FACILITY

MONDAY, MARCH 7, 1994

THE

HONG

KONG

(HKMA)

TODAY

(MONDAY) AUTHORITY MONETARY ANNOUNCED THAT IN ADDITION TO EXCHANGE FUND BILLS/NOTES AND GOVERNMENT MARKETABLE DEBT INSTRUMENTS WILL, BONDS, CERTAIN HONG KONG DOLLAR

AND REPURCHASE WITH IMMEDIATE EFFECT, QUALIFY AS SECURITIES FOR SALE

FACILITY (REPO) AGREEMENT

LIQUIDITY ADJUSTMENT OPERATED BY THE HKMA.

UNDER

THE

BE OF

ACCEPTABLE

CREDIT

(LAF)

QUALITY

AND BY THE

SUCH INSTRUMENTS MUST CLEARED THROUGH THE CENTRAL MONEYMARKETS UNIT (CMU) OPERATED HKMA.

SECURITIES

FOR ACCEPTABLE

REPO "THE INCLUSION OF MORE DEBT

THEIR LIQUIDITY. ONE UNDER LAF WILL BE HELPFUL TO BANKS IN MANAGING

THE LAST RESORT OF THE ROLES OF THE HKMA IS TO ACT AS THE LENDER OF

MR THE CHIEF EXECUTIVE OF OF LIQUIDITY TO THE BANKING SYSTEM," JOSEPH YAM, SAID.

DEBT "THE

SECURITIES ISSUED

BY THE

HKMA,

MASS TRANSIT RAILWAY AS WELL AS THOSE CORPORATION AND THE PROVISIONAL AIRPORT AUTHORITY

A- IF ISSUED BY BANKS DEBT INSTRUMENTS WITH RATINGS NOT LOWER THAN

REPO AND NOT LOWER THAN A IF ISSUED BY CORPORATES WILL NOW QUALIFY AS SECURITIES UNDER THE LAF," HE ADDED.

THE LAF, WHICH IS HONG HAS BEEN USED EXTENSIVELY BY

SINCE ITS INTRODUCTION IN JUNE 1992, KONG VERSION OF THE DISCOUNT WINDOW, LICENSED BANKS.

TAKER OF FUNDS THE HKMA HAS BECOME THE LENDER AS WELL AS THE

OF AFTER THE CLOSE OF THE INTERBANK MARKET. IN DECEMBER 1993, A TOTAL

BILLION $57 AND

WAS TAKEN BY THE HKMA $33 BILLION WAS LENT OUT THROUGH THE LAF.

OF THE THE

BANKS LICENSED

TO ADJUST THEIR BY PROVIDING A FACILITY FOR LIQUIDITY POSITIONS, THE LAF HAS CONTRIBUTED TO THE REDUCTION VOLATILITY OF OVERNIGHT INTERBANK INTEREST RATES, ESPECIALLY WHEN MARKET IS UNDER PRESSURE DURING RECENT HEAVY SUBSCRIPTION PUBLIC OFFERS.

OF INITIAL

AGREEMENT

NORMALLY (REPO);

THE PROVISION OF OVERNIGHT FUNDS THROUGH THE LAF WILL

FORM

AND REPURCHASE BE DONE IN THE

OF A SALE

OF EXCHANGE FUND BILLS/NOTES PREVIOUSLY ONLY A BANK'S HOLDING GOVERNMENT BONDS HAVE BEEN ACCEPTED AS REPO SECURITIES.

THE HKMA HAS ISSUED A CIRCULAR TO ALL LICENSED BANKS THEM OF THE NEW ARRANGEMENTS.

AND

INFORMING

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