On 17th December 1973 the Bank announced arrangements for improving their control over the money supply and bank lending, under which the banks and finance houses have agreed individually to place non-interest bearing supplementary deposits with the Bank if the interest-bearing eligible liabilities of the institutions concerned grow faster than a specified rate. The rate specified for the first six months is 8%, and that for the subsequent period is to be announced no later than the end of April. No deposit is required to be lodged until the scheme has run for six months. Thereafter, while the arrangements remain activated, the amount to be lodged will be calculated by reference to a three months' moving average of the growth of interest-bearing eligible liabilities above their average at the make-up dates of October, November and December 1973. The scale of supplementary deposits to be made will rise with the excess of the three months' average over the allowable rate of growth: for an excess of 1 % or less the rate will be 5% of the excess, for more than 1% up to 3% it will be 25%, and thereafter 50% (the maximum under the scheme). The arrangements apply to interest-bearing eligible liabilities only, and so exclude such non-interest-bearing liabilities as most current accounts. The arrangements can be suspended by the Bank when that seems appropriate, but are intended to be permanently at hand.
Credit control - a supplementary scheme