TNAG-2471-FCO40-3595-Confidential-talks-between-the-UK-and-China-regarding-financ-1992 — Page 78

CONFIDENTIAL

4

8.

from

Second is to seek late liquidity assistance

the Exchange Fund. But this is not a popular alternative for three reasons:

(a) late liquidity assistance from the Fund

is not always forthcoming because of

concern on the part of the Exchange Fund

that its provision under

under certain monetary

conditions may be misinterpreted to be a more permanent injection of liquidity

into the interbank market

market for a monetary

purpose;

(b) the terms for the provision of late liquidity assistance by the Exchange Fund

are not standardized because of the need

on the part of the Exchange Fund in such operations to take account of prevailing monetary conditions and of credit risks;

and

(c) some

reservation

licensed banks have the

that the seeking of such late liquidity assistance from the Exchange Fund may,

in the event that it becomes known to

other banks or to members of the public,

be misinterpreted as the banks concerned experiencing fairly serious difficulties, thereby affecting confidence in those

banks.

CONFIDENTIAL

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