Singapore's c.bank widens liquidity access for banks
SINGAPORE, July 24 (Reuters) - Singapore's central bank on Thursday widened its liquidity facility to non-primary dealers such as investment banks, a move similar to the Federal Reserve which opened its tap after the collapse of Bear Stearns.
Previously the Monetary Authority of Singapore's standing facility was open to 11 primary dealer banks and non-primary dealer banks could only access the facility through primary dealers such as DBS Group (DBSM.SI) and Citigroup (C.N).
"Experience in other developed markets has also demonstrated that such a facility is particularly useful in times of unusual market volatility, as this enhances confidence that liquidity needs in the banking system will be met," it said.
Analysts said very few banks are likely to take advantage of the new system because of low money market rates in Singapore where the overnight rate is around 0.3 percent SGDOND=.
"With ample liquidity in the domestic money market, there may be little immediate impetus for the banks to tap on this standing facility, unless there are periods of financial turbulence where the overnight rate spikes higher and liquidity dries up," said Selena Ling, an economist at Oversea-Chinese Banking Corp.
She said the MAS facility is permanent unlike the temporary bi-weekly facility of the Federal Reserve.
The standing facility is a borrowing and lending tool similar to the one provided by the Bank of England, the European Central Bank and the Reserve Bank of Australia.
The MAS said the standing facility is not a mechanism for interest rate targeting and is purely for the purpose of containing intra-day interest rate volatility. (Reporting by Saeed Azhar)
