Learn the lesson of the June affair
The liquidity crunch that sent the overnight rate in the interbank market on a roller-coaster ride throughout most of June may have eased, but the lesson that must be learned from that fiasco will have far-reaching implications for financial reform in the months and years to come.
Reports of bankers scrambling for money, which filled the media in recent weeks, must have amused the public who never dreamed there would be a day when lenders would be begging for funds. Indeed, more than one bank as reported to have offered 0.8 percent interest for overnight deposits from the public as available funds in the interbank market ran low.
But amusing as it might seem, the liquidity crunch raised exaggerated concerns about the overall health of the banking sector. Such concerns were blown up by overly sensational press reports alluding to a looming credit crisis.