the Standing Facility
Since its inception
in June 2006, the MAS Standing Facility has developed
into MAS’ main liquidity facility for financial
institutions, allowing MAS to successfully fulfill
its dual role of fine-tuning the liquidity of the
banking system and managing interest rate volatility.
The Standing Facility helps to improve the day-to-day
liquidity management of banks in Singapore by providing
a channel for them to borrow from, or place excess
funds with, MAS directly. The Standing Facility also
boosts market confidence by giving banks the assurance
that liquidity needs in the banking system will be
met in times of unusual volatility.
Given its importance,
the Standing Facility is reviewed regularly to ensure
its optimal role in the proper functioning of the
banking system. In 2008, MAS expanded the eligibility
criteria to allow all MEPS+ participants to access
the Standing Facility, in line with global central
banks’ best practice for discount windows. In
2009, MAS announced an expansion of eligible collateral
for accessing the Standing Facility.
In February 2010,
the terms and conditions of the Standing Facility
were refined further. The minimum size of a transaction
was reduced from S$20 million to S$10 million to allow
for participation from more banks. This signaled MAS’
commitment to ensuring financial stability. The minimum
transaction limit could be lowered further on a case-by-case
basis, subject to MAS’ approval. This has given
the Standing Facility additional flexibility.