HONG KONG MONETARY AUTHORITY Annual Report 1996
HONG KONG MONETARY AUTHORITY
MONETARY REFORM MEASURES
To ensure that the objective of maintaining exchange rate stability is effectively delivered, the Government has implemented a series of monetary reform measures since 1988 (see box below).
MONETARY REFORM MEASURES SINCE 1988
| Accounting Arrangements | 1988 |
| Exchange Fund Bills and Notes Programme | 1990 |
| Liquidity Adjustment Facility | 1992 |
| Establishment of the HKMA | 1993 |
| Bilateral repurchase agreements with regional central banks | 1995/96 |
| Setting up of HKMA's New York representative office | 1996 |
| Real Time Gross Settlement interbank payment system | 1996 |
Marking a watershed in the monetary management system was the introduction in 1988 of the Accounting Arrangements between the Exchange Fund and the Hongkong and Shanghai Banking Corporation Limited (HSBC), the then Management Bank of the Clearing House of the Hong Kong Association of Banks. The Accounting Arrangements provided a framework for the Government to influence the supply of interbank liquidity and indirectly the price of money. Thus, as and when appropriate, the Government may adjust the supply of interbank liquidity to influence interbank interest rates for the purpose of maintaining exchange rate stability.
Having put in place a framework for influencing interbank liquidity, further steps were taken to develop suitable tools for monetary operations. In March 1990, the Exchange Fund Bills and Notes Programme was introduced to provide a new tool for open market operations. Starting with the issue of 91-day Bills, the Programme has now been expanded to include 10-year Exchange Fund Notes ( Chart 2).
In June 1992, the Liquidity Adjustment Facility (LAF) - Hong Kong's version of the discount window - was introduced. The LAF allows banks to obtain overnight liquidity