Market disruption clauses invoked

October 7, 2008 Banks have over the past week used or are considering using market disruption provisions in their loan agreements to pass on their increased cost of funding to their customers. The background to this is that the cost to banks of obtaining matching deposits in the interbank markets for their loans to their customers is currently not accurately reflected by the screen rates which determine the rate of interest for those loans. The screen rates would normally reflect the average cost of borrowing in the interbank markets and the actual cost to an individual bank would normally only vary from this according to its credit rating.

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