TNAG-2471-FCO40-3595-Confidential-talks-between-the-UK-and-China-regarding-financ-1992 — Page 81

CONFIDENTIAL

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basis.

As

(c) The Exchange Fund would retain the existing arrangement to extend late liquidity assistance selectively to banks on an unsecured

at present, availability of such assistance is not assured. When given, it would be on terms determined at the absolute discretion of the Exchange Fund and subject to prudent credit limits assigned by the Exchange

Fund.

13.

(a) In order to channel funds to those in need, the Exchange Fund would at the same time bid for any overnight surplus liquidity that licensed banks may wish to offer, at a bid rate determined and announced in advance by the Exchange Fund.

(e) As LAF is intended to be of a last resort nature, and to discourage the use of LAF as an alternative for prudent management by licensed banks of its Hong Kong dollar liquidity, through suitably making use of the interbank market, the Exchange Fund's bid and offer rates for overnight liquidity would have a wide spread of a minimum of one percentage point.

It

is hoped that LAF will до some way to meeting the needs of licensed banks in their prudent management of liquidity. This does not affect the existing arrangements between the Exchange Fund and the Management Bank,

Sub-Settlement Banks, and the Clearing Facilities of the Clearing House of the Hong Kong Association of Banks.

the

Settlement Banks

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