Because interbank deposit and loan positions need to be cleared daily, rediscounting can reflect the true state of interbank deposit and loan business to a certain extent.
Normally, the interbank lending market can cover these shortfalls. However, if a dozen or so commercial banks lend out large sums of money, the interbank lending market will experience a severe shortage of funds.
At this point, the only thing these commercial banks could do was to approach the Mexican central bank, the Banco de Mexico, and request assistance, which meant releasing liquidity.
Mexico's economic data for the first two quarters of this year was poor, down to the extreme, with insiders estimating a maximum of only 2%.
This will inevitably lead to a decline in the savings rate.
While the Mexican bank has done a relatively good job in stabilizing the exchange rate, this exchange rate policy inevitably comes at a great cost: sacrificing sufficient time to react to the market.
Meanwhile, major commercial banks suddenly increased their lending, and this unusual activity was noticed by the staff of the Mexican bank.
As an advisor to the central bank's board of governors, Antonio's main job was to monitor for any unusual situations in the departments he was responsible for and report them to the governor in a timely manner.
However, he doesn't want to do that right now.
Because both the central bank governor, Audis, and the finance minister, Seibert, had their own important matters to attend to, namely determining whether the peso needed to be devalued. In other words, they simply didn't have the energy to deal with fluctuations in the rediscount market.
So Antonio decided to suppress the news and not cause any more trouble.
Although he knew the matter was of great importance, as an advisor to the council, he understood which aspect was more important.
“No need to report it yet,” Antonio said.
Unbeknownst to him, his actions became part of the Mexican bank's financial problems, ultimately triggering an explosion.
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