Nevertheless, there are numerous intermediaries who say they have been introduced to bankers who say they trade in such a market. Banks issue instruments at substantial discounts to other banks. The instrument is called a prime bank guarantee , a standby letter of credit , a blocked funds certificate or something similar. They all offer some kind of promise that a bank will pay a sum of money at a future date - an instrument for which there is no recognized market.
Attention tends to focus on the instrument rather than the substantial discount.
The discount is said to be much more than the amount required to allow for interest. Such generosity is, of course, unthinkable. Some appear to believe the instrument has been carefully. The logical extension of this proposition is that the banks issuing such instruments are preparing false accounts and may be hopelessly insolvent. The secret market is said to be well known to the banking regulators throughout the world who condone it as a necessary way of managing the money supply.