For example, during February and March 2002, uncertainty about financial system stability was heightening as full protection of time deposits was about to be lifted from April. Moreover, the demand for such risk-free assets as treasury bills (TBs) and financing bills (FBs) by all economic agents, including financial institutions, increased significantly in the market.
In such circumstances, the Bank’s offers to purchase TBs and FBs failed to attract a sufficient number of bids, and undersubscription ensued. A change in the long-standing skewed distribution of funds across financial institutions also contributed to undersubscription. In the past, major banks had a balance-sheet structure in which the deposits they received fell short of their loans.