CONFIDENTIAL
•
In the situation when solvency of a bank is not threatened and the bank, for one reason or another, is unable ΟΙ has overlooked the need during the day to obtain the necessary liquidity in the market, last-
resort liquidity assistance is currently available from
the Exchange Fund and from its Settlement Bank. A =
licensed bank can either
request late liquidity assistance from the Exchange Fund between 4:15 pm and 4:45 pm, which is not always available, or be overdrawn
in its clearing account with its Settlement Bank, and
in the case of the Management Bank of the Clearing House,
be overdrawn in. its clearing account with the Exchange
Fund.
•
Adequacy of present arrangements.
7.
In a system where there is same day clearing of cheques and transactions for value the same day are common, the management of funding is understandably a difficult task. It is often late in the day and after
the close of the money markets when a bank realizes that it may be seriously short of funds. At present there are three alternatives open to the bank. First is to try and identify quickly banks which are long in funds and arrange to borrow from them. Banks however
feel that this is: easier said than done. Approaching competitors late in the day for funds is not something that banks would like to do. It may also have to do a lot of ringing around and there simply is no time to do so. The Exchange Fund has for many occasions served as the middle man but was not always successful in playing this role because of the lack of interest on the part of the banks to lend for fear that they
themselves might be caught short.
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CONFIDENTIAL
Pi
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