TNAG-1773-FCO40-2525-Hong-Kong-Exchange-Fund-Hong-Kong-Futures-Exchange-Limited--1988 — Page 146

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852 5 865 6146 P.03

FRESS RELEASE

1988-07-15 16:20 MONETARY AFFAIRS BRANCH.

New Accounting Arrangements between the Exchange Fund and The Hongkong and Shanghai Banking Corporation

The Monetary Affairs Branch of Hong Kong Government and The Hongkong and Shanghai Banking Corporation (HSBC) announce that the Governor in Council has approved the implementatio of new accounting arrangements which have been agreed between HSBC as the Management Bank of the Clearing House of the Hong Kong Association of Banks and the Exchange Fund. The purpose of the new arrangements is to enable the Government, through the use of the Exchange Fund, to exercise more effective influence over the availability and price of money in the interbank market and thus to assist it better to maintain exchange rate stability within the framework of the linked exchange rate system. The Exchange Fund Advisory Committee has been consulted and members of the Committee unanimously supported the introduction of the new arrangements.

2.

The details of the new accounting arrangements are as follows:

(a)

(b)

HSBC will maintain a Hong Kong dollar account (the "Account") with the Exchange Fund;

HSBC will aim to maintain a balance (the "Balance") in that Account at not less than the net clearing balance of the rest of the banking system;

(c)

no interest will be paid on credit balances in the Account;

(a)

(e)

(£)

(g)

(h)

if the Balance falls short of the net clearing balance, HSBC will pay interest on the shortfall to the Exchange Fund;

if the net clearing balance is in debit, HSBC will pay interest on the debit amount to the Exchange Fund;

up to a certain amount, the rate of interest payable by HSBC will be BLR or HIBOR, whichever is higher. Beyond that amount, the interest rate payable will be 3% over BLR or HIBOR, whichever is higher. In exceptional circumstances, an alternative rate may be determined by the Financial Secretary, after consultation with HSBC;

the Exchange Fund will use the Account, at its discretion, to effect settlement of its Hong Kong dollar transactions with HSBC;

the Exchange Fund will also use the Account, at its discretion, to effect settlement of its Hong Kong dollar transactions with other licensed banks.

13.