Hong Kong’s de facto central bank yesterday announced a package of temporary measures aimed at increasing liquidity into the city’s nervous banking system as financial turmoil dried up credit.
The Hong Kong Monetary Authority (HKMA) unveiled five moves to try to increase assistance to the city’s banks, which are reluctant to lend to each other because of the recent turmoil in the credit markets.
“Continuing stress in the financial systems of developed markets has caused some concern among licensed banks in Hong Kong over the credit worthiness of each other,” an HKMA spokesman said.
“This concern, together with a wish to preserve liquidity to meet their own contingent needs, has led to a general shortage of interbank liquidity and difficulties on the part of individual licensed banks in obtaining funding in the interbank market,” he said.
“The five measures will provide further tools for the HKMA to help ensure that Hong Kong’s banking system continues to function effectively,” the spokesman said in a statement.
The five technical measures include lending term money to banks for up to one month against credit-worthy capital, extending repayment periods for some borrowing, removing some penalties and lending against US dollar assets.
It will also consider requests to conduct foreign exchange swaps between the US and Hong Kong dollar.
The measures will be introduced tomorrow and remain in place until March.
The spokesman said Hong Kong’s banking system was healthy and robust, and was well prepared for the turbulent conditions.