The Monetary Authority will continue to conduct foreign-exchange swap and term repo under its market operations to provide Hong Kong-dollar liquidity assistance to licensed banks if needed.
The initiatives were among the five temporary measures to provide liquidity assistance which were introduced on September 30 last year and due to expire on March 31.
Arrangements for obtaining liquidity at the discount window will return to the position applied before the five temporary measures were introduced, that is, using only Exchange Fund paper for overnight repo and reinstatement of the Hong Kong interbank offered rate leg to the calculation of the base rate. This is to safeguard exchange rate stability under the Currency Board system.
The narrower 50-basis point spread over the federal funds target rate will be retained, compared with the previous spread of 150 basis points.
The authority said today the arrangements are to provide assurance about the availability of liquidity to banks in case of need after the expiry of the temporary measures which have been effective in relieving the stress in the local interbank market.
To strengthen the Lender of Last Resort framework for banks under liquidity stress, the concerned policy statement has been amended to expand the types of assets and facilities eligible for obtaining Hong Kong dollar liquidity. Click here for details.
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