HKMA offers more support to lenders
Updated: 2008-11-07 07:33
By Hui Ching-hoo(HK Edition)
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The Hong Kong Monetary Authority makes efforts to mitigate the tight lending among local banks, soften Hong Kong interbank rates and boost the liquidity in the banking system. Bloomberg |
The Hong Kong Monetary Authority (HKMA) is offering further support to banks in an attempt to ease the credit squeeze.
The HKMA will extend the maximum tenor of collateralized term lending from one month to three months and set a lower lending rate in order to mitigate the tight lending among local banks.
The arrangements take immediate effect and will remain in force until the end of March 2009.
HKMA Chief Executive Joseph Yam yesterday expressed hope that the refinements could soften Hong Kong interbank rates and boost liquidity in the banking system.
The HKMA has also injected liquidity into the banking system on Wednesday by selling HK$3.87 billion for US dollars in the market.
The HKMA has pumped cash into the banking system four times since Oct 31 with a total of HK$8.35 billion.
"With a series of injections (liquidity) over the past few days, the aggregate balance of the banking system has reached about HK$38 billion," said Yam. "It indicates that the liquidity is increasing in the system, but money lending remains tight at the moment."
The authority sets the interest rate of such lending below interbank interest rate in consideration of its secured nature, as well as the current distortions and frictions of the interbank market.
The refinements are the fifth of the five measurements introduced by the HKMA on Sept 30 in the wake of the US financial crisis.
Yam expressed hope that the refinements are able to subdue interbank interest hike and to invigorate lending activities between local lenders.
He said the local lenders should push forward the relaxing condition to the retail sector, warning that the economic downturn and stringent environment might be prone to a vicious cycle.
"It is the time the lenders have to do their jobs," he said. "Hong Kong people are on the same boat at this critical moment... it is unwise for anyone to rock the boat."
With the new measures, the three-month Hibor yesterday dropped to a seven-week low of 2.45 percent, while one-month Hibor down 4 basis points to 1.35 percent.
Hang Seng Bank General Director Andrew Fung applauded the refinements, saying the relaxation can help small local lenders to carry out short-term borrowing at a lower cost.
He said the current aggregate balance of the banking system is sufficient and the interbank rate stays at a reasonably low level.
(HK Edition 11/07/2008 page2)