Foreign cash freeze sparks liquidity fear - Regulators react to concerns about Y2k : LUSENET : TimeBomb 2000 (Y2000) : One Thread


Foreign cash freeze sparks liquidity fear

Regulators react to concerns about Y2K

Soonruth Bunyamanee

The Bank of Thailand will not carry out any foreign exchange transactions with commercial banks over the first two weeks of the new year to avoid unexpected problems due to Y2K.

But foreign banks have expressed concern about the decision, fearing a liquidity shortage over the period.

The central bank advises commercial banks to build up their own liquidity reserves and collateral to access a special contingency facility at the central bank.

A notice of the decision by regulators to suspend foreign exchange transactions was sent to local banks this week.

Regulators say they will increase by more than 75% bank note reserves for the end of the year over original targets.

This will result in an additional 290 billion baht in reserved notes to ensure sufficient liquidity in the market.

Operations through the repurchase market and loan window will be extended for two more hours over the period, to give financial institutions greater flexibility in managing funds.

For the first half of December, the central bank will reduce the maturity of swap bids to two weeks from one month, matching the timeframe where regulators will cease foreign exchange transactions.

An auction of two-month swap facilities will also be opened for banks in December. An additional measure will be the extension of transaction periods for purchases of promissory notes and US dollars from banks.

One banker said the suspension of foreign exchange dealings would affect foreign banks in particular, as they were more reliant on the exchange facility from the central bank for daily operations.

Foreign banks also had relatively smaller holdings in government and state enterprise bonds, used as collateral in repurchase transactions with the central bank for liquidity management.

One foreign banker said regulators were "overreacting" to the potential problems of Y2K, saying that a suspension should only be made for perhaps several days over the New Year period.

In any case, short-term money market interest rates are expected to become more volatile over the New Year as banks position themselves to manage liquidity demands.

Regulators have sought to reassure investors and analysts that the financial system is completely Y2K compliant, after several foreign institutions said Thailand was at a relatively high risk from computer breakdowns.

Y2K concerns have been attributed to a decline in currency and equity markets and new investment and asset reallocation by foreign investors.

-- Homer Beanfang (, September 30, 1999


The Baht has been under fire here recently, I wonder if it's related?

For educational and liquidity use only:

ASIA FOREX -- Jawboning helps baht, peso off lows (Reuters) 0930 GMT - Regional currencies remained mixed in late trade but the fragile baht and peso came off their lows following government attempts at verbal intervention. Dollar/yen broke resistance at 106. - Sep 29 5:40 AM EDT

Thai says baht should not drop below 40 (Reuters) BANGKOK, Sept 29 (Reuters) - The Bank of Thailand said on Wednesday that the baht should not drop below 40 per dollar based on the country's economic fundamentals. Cherdthawee Chareonpitak, assistant central bank governor, told reporters government policy and solutions to economic problems were moving in the right direction. - Sep 29 2:11 AM EDT

ASIA MARKETS - Baht heads lower, stocks firm (Reuters) By Richard Hubbard HONG KONG, Sept 28 (Reuters) - Asian regional currencies eased and stock markets were mostly firmer on Tuesday as the fortunes of the Japanese yen dominated investor sentiment. The currencies were largely marked down in line with the stronger dollar- yen rate, but stock markets took the view that the softer tone in the yen was positive for the region and rallied. - Sep 28 6:55 AM EDT

-- Gordon (, September 30, 1999.

Got gold?

-- todays Tom Sawyer (RUSH@2112.rockon!), September 30, 1999.

Andy, long ago and far away, before we knew he was a true goldbug, wrote a series on "VISA is TOAST" (it's in the archives, hunt it up yourself as it's at least 3 threads) in which he predicted the "islanding" of banks and described why that would be fatal to the banking establiishment in the WORLD.

Here is the FIRST ISLAND!!


Got hideout?

Night Train

-- jes an ol footballer who fergits how to spell his name now an then (Nighttr@in.lane), October 01, 1999.

Gee, maybe they (ALL governments) will have to use something real instead of fiat to rebuild trade and investment after TSHTF.

-- A (, October 01, 1999.

Moderation questions? read the FAQ