The two major initiatives proposed to boost the liquidity in the banking system were well received by industry practitioners who said the moves would help ease the credit crunch. Hong Kong Monetary Authority deputy chief executive David Carse said the main objective of the measures was to mobilise existing liquidity more effectively. In the first of the moves, the Hong Kong Mortgage Corporation will shortly announce measures to streamline its purchase programme for residential mortgages. Chief executive officer Peter Pang Sing-tong said the corporation would sign with each of the banks a commitment to buy a certain amount of residential mortgages within a one-year period. This contrasts with the prevailing arrangement in which the corporation handles its purchases of home loans from banks on a case-by-case basis. The move will give banks greater certainty about the amount of loans they can sell to the corporation and offer greater assurance about the availability of funding, helping them plan new loan business more effectively. Mr Carse said: 'With that greater confidence about the ability to turn mortgages into cash in an assured amount, that should give the banks more confidence to start lending again rather than sitting on liquidity.' Hong Kong Association of Banks chairman Mervyn Davies said the move demonstrated the corporation's flexibility and should help ease pressure on banks' balance sheets. Liu Chong Hing Bank executive director Nam Lee-yick said he thought the move would give banks more confidence in writing new loans. 'Banks will then take a more active role in creating new home loans and managing their mortgage portfolio,' he said. The second move is to encourage the development of the Hong Kong dollar repurchase market by allowing banks better use of Hong Kong dollar debt as collateral for interbank lending. Mr Carse said the problem was that banks with surplus liquidity were reluctant to lend because of credit risks. He said the repurchase market would help address that problem because banks would be able to lend on a secured basis. The move allows a bank to borrow from another bank an amount beyond their pre-determined credit limit so long as the borrowing bank has enough debt papers - Exchange Fund notes and other Hong Kong dollar debts eligible for discounting purposes at the Liquidity Adjustment Facility (LAF) - to pledge as collateral. Hong Kong banks are holding $138 billion in Exchange Fund notes and other LAF-eligible papers for liquidity management purposes. These holdings lock up banks' liquid funds.