HONG KONG MONETARY AUTHORITY Annual Report 1996
HONG KONG MONETARY AUTHORITY
assistance at the Offer Rate. At the same time, banks with excess liquidity may deposit the surplus funds with the Exchange Fund through the LAF at the Bid Rate. In short, the LAF enables banks to make late adjustments to their liquidity position. The LAF Offer and Bid Rates effectively form the ceiling and the floor of the overnight interbank interest rate. The HKMA can therefore influence interbank interest rates directly by lowering or raising the LAF Rates.
In April 1993, the HKMA was established to assume the functions of a central banking institution. Further reforms have been implemented to strengthen the robustness of the monetary management system, particularly in the face of the volatility in international capital flows and growing integration of world's financial markets.
Following speculative attacks on a number of Asian currencies in January 1995, the HKMA initiated bilateral meetings with several regional central banks. These have resulted in the signing of repurchase agreements to enhance the liquidity of each other's foreign exchange reserves thereby ensuring monetary stability. By the end of 1996, the HKMA has signed bilateral repurchase agreements with eight central banks/monetary authorities, including those from Australia, China, Indonesia, Japan, Malaysia, Singapore, the Philippines and Thailand.
In October 1996, the HKMA's New York Representative Office was officially opened. This office plays a crucial role in strengthening the HKMA's capability in monitoring the foreign exchange and other financial markets in New York. It also helps to step up HKMA's liaison with the US Federal Reserve and other US regulatory authorities.
The introduction of the Real Time Gross Settlement (RTGS) system, a new interbank payment system in December 1996 marked another milestone in HKMA's effort to strengthen its monetary management capability. Under the new system, all licensed banks settle directly with the HKMA and the impact of monetary operations is more direct and effective. As the HSBC ceased to be the Management Bank of the Clearing House of the Hong Kong Association of Banks, the Accounting Arrangements were therefore terminated in December 1996.