writing Facilities (RUFs) are the best known.
These are facilities whereby a bank guarantees
the issue of securities during an agreed period; if
none, or an insufficient number, of these
securities are subscribed for at or below the
agreed issue price, the bank has an irrevocable
obligation to furnish credit up to the amount of
the deficit. Facilities of this type amounting to
48 billion were provided in 1985,
compared with 3.3
Diiiion two years in billions of dollars
previously. As they are
primarily in the nature
of a guarantee, and not a
form of credit, such
obligations are not
provided in the balance
sheet. However, as there
is always a risk that the
securities will eventually
have to be taken into
portfolio, the supervisory ™3 wm isss
authorities in the
Netherlands, as elsewhere, have decided that
certain solvency requirements should apply
to these new instruments. The costs allied to
these requirements led the banks to adopt a
cautious attitude to them in the closing months
of 1985, and this was accentuated by the
extremely slim margins, which in some cases are
outweighed by the risks. The debtor risk is not
necessarily the most serious of these, but rather
the risk that the securities will have to be taken
into portfolio at less than the market value.
Debtors, too, are displaying some hesitation,
which is motivated by the feeling that an issue of
notes will succeed even without this guarantee.
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