HKMA extends collateralised loans to 3 months
HONG KONG, Nov 6 (Reuters) - The Hong Kong Monetary Authority (HKMA) will extend collateralised lending to local banks to three months from one month and charge interest rates below the interbank rate, in a bid to encourage banks to provide loans to support industries in the territory.
Hong Kong's central bank announced the measures on Thursday in a bid to boost lending and keep long-term interbank rates low.
'The activity in lending 3-month money has not returned to its normal level, and we expect demand for liquidity may increase ahead of year end,' HKMA chief Joseph Yam told reporters on Thursday.
He added that market liquidity was still tight in longer term money, such as 3-month lending, despite recent injections.
Hong Kong's central bank injected HK$3.875 billion ($497 million) into the territory's interbank market late on Wednesday in New York trading to stem an appreciating Hong Kong dollar . The injection was the fourth intervention by the HKMA since last Friday, involving HK$8.355 billion, including the latest intervention.
'In particular, over the last four working days we have bought quite an amount of U.S. dollars at the 7.75 level, injecting even more liquidity with an aggregate balance of up to HK$38 billion,' Yam said. 'This figure is big, indicating there is a lot of liquidity in the banking system.'
The recent moves had dragged the one-month interbank rate to below 2 percent and 3-month interbank rate to below 3 percent but activity in lending 3-month money had still not returned to normal, Yam said.
'What we all do is aim to provide banks and Hong Kong with a looser liquidity environment, hoping banks can help out industries by making it easier to borrow money,' Yam said.
'I guess the banking industry understands, and everyone understands, that the credit crunch and the slipping economy might form a vicious cycle. (I) hope everyone will act accordingly to stop this vicious cycle from forming. I hope all banks will support the economic activities,' Yam said.
In September, the HKMA announced five measures to provide more liquidity for banks for six months to ease credit tightness, including expanding discount window operations to include U.S. dollar assets.
Source:http://www.forbes.com/afxnewslimited/
