barry whiteside : brief update on fiji ’ s economy address by mr barry whiteside, governor of the reserve bank of fiji, at the opening of bank south pacific ’ s lautoka branch, lautoka, 10 november 2011. * * * mr kevin mccarthy, bsp fiji country manager management and staff of bank south pacific distinguished guests ladies and gentlemen introductory comments let me start by thanking mr. mccarthy for his kind invitation to come to lautoka this evening to open bank south pacific ’ s newest branch. it is an honour for me to be here. i must say that i have many fond memories of our second city, as i spent some of my most formative years here when my dad served as postmaster back in the 1960s. i can clearly remember my drasa avenue school days, and the homes we lived in on kadavu street, valima hill and tagimoucia street – stretching from one end of town to the other. i also remember the great abundance and sweet smells of sugar cane and mangoes, and the sound of the regular sirens to signal the change of shift at the then csr mill. i remember tasting “ burnt ” sugar for the first time many years ago and taking early morning rides to saweni on the free train. as you may have guessed i have many fond memories of this city. ladies and gentlemen, the opening of your new lautoka westfield branch is another milestone to check off in bsp fiji ’ s relatively short history in our country. this pacific bank continues to expand its operations and make its presence known in our market. not long ago, when it opened its doors in december 2006, bsp was regarded by some as a small operator with a niche market inherited from habib bank, the bank whose single branch fiji operations bsp had purchased. we of course know that bsp is the largest bank and major player in its home country of papua & new guinea with more than fjd9 billion in assets. ( note : k10. 972 billion as at june 2011 ) however, bsp has come to our country with a specific purpose to grow its international footprint. i can say that in the short span of time since its inception here, it has certainly worked hard to make its presence felt. my staff inform me that bsp fiji operations now includes representation points through 20 branches ( including your westfield branch ), 48 agencies, 97 atms, 171 eftpos merchants and 568 eftpo

, could be placed in the market. banks hoarded liquidity in order to be safe from unexpected outflows or the unknown extent of write - downs. because the usual market refinancing possibilities were blocked banks relied on highly rated collateral for their funding and the liquidity provided by the central bank. the spread between eonia and three - month euribor rose to the highest level ever at 70 bps and has remained high. unsecured trading in the money market beyond one week effectively ceased to exist. ii. central bank reaction function as liquidity retracted first from the credit markets, then money markets, intermediation vanishing, central banks had to move in : to restore orderly market conditions ; ensure the integrity of monetary transmission channels, and to ensure financial stability or prevent a systemic crisis. in view of the confidence crisis among market participants, due to uncertainty about financial individual exposures, the issues at stake were : 1 ) to have money market rates evolve close to the policy rates ; 2 ) to address the term structure problem to the extent that it was threatening the first issue ; 3 ) and thirdly to address the distributional problem of liquidity among market participants for reasons of financial stability. the somewhat more complex and elaborate toolbox of the eurosystem proved very valuable in this respect. - this applies to the instruments used to provide liquidity : the mro and ltro - this applies to minimum reserve features - this applies to the number of counterparties with direct access to central bank money - this applies finally to the range of eligible collateral let me say a word about each of these features of the eurosystem operational framework : 1. at moments of term structure difficulties and shortening of the liquidity constraints, it is of advantage to have both : one - week and three - month liquidity providing tenders conducted weekly and monthly. fine tuning operations and extraordinary additional tenders, according to standard procedures, allowed a commensurate response within a familiar context, rather than adding to prevailing uncertainty by introducing, in an emergency context, untested new facilities, instruments or procedures. 2. in monetary policy operations, the eurosystem grants direct access to liquidity to a large number of credit institutions. all euro - area institutions subject to minimum reserve requirements and which fulfil the relevant contractual or regulatory arrangements applied by their respective ncb, may access the standing facilities and / or participate in open market operations based on standard tenders. at the end of