Thirdly, notwithstanding the availability of suitable collateral, there will be a maximum limit on the amount of support provided to an individual institution through repos or the credit facility. This limit would normally be set at between 100% and 200% of the capital base of the institution concerned subject to a cap of $ billion. Exceptions We believe that the provision of these details will go a long way towards removing market uncertainty and improving market liquidity, especially in times of crisis. This is the first time that we have made clear our requirements and parameters in setting out the mechanics for lender of last resort support. The emphasis, both in these details and in the preconditions for support, is on a rule-based approach more than on discretion or constructive ambiguity, and this is consistent with the HKMA’s policy of transparency. It is, however, necessary to stress that the policy still requires the exercise of discretion by the HKMA DWYDULRXVVWDJHV LQ MXGJLQJ ZKHWKHU D V\VWHPLF ULVN H[LVWV IRU H[DPSOH LQ GHFLGLQJ ZKHWKHU DQ institution meets the preconditions for support, and in determining the methods and level of support. Furthermore, any policy that is essentially a contingency plan for dealing with unusual, unanticipated, and undesirable situations must necessarily contain a provision for circumstances that fall outside the framework outlined in the policy. Such a situation might arise where, for example, an institution is unable to comply with the preconditions for lender of last resort support that I have outlined.
We called upon Marvin Goodfriend of Carnegie Mellon University to give his views on the optimum inflation rate, Frederic Mishkin of Columbia University to write about the policy of inflation targeting and to tell us to what extent it is truly a new phenomenon, and William White of  BIS Review 71/2007  1  the Bank for International Settlements in Basel to address the difficult question of whether price stability is really enough. Manfred Neumann from the University of Bonn was asked to provide an assessment of fixed and flexible exchange rate systems, Peter Kenen of Princeton University to give us his opinion on the need for foreign exchange reserves in flexible exchange rate systems, Martin Hellwig from the Max Planck Institute in Bonn to reveal his thinking on the co-existence of the Swiss franc and the euro, and Alexander Swoboda of the Graduate Institute of International Studies in Geneva to share his ideas with us on the reform of the international monetary system. This third section, which is aimed rather more than the first two sections at a specialised audience, is available in English only. The two other sections, meanwhile, are available in French, German, Italian and English. It only remains for me to that I hope you will find the book both engaging and interesting.