The Reserve Bank's new flexible procedures for providing accommodation to banking institutions have now been in operation for more than two months. Although certain teething problems have been experienced with the gradual introduction of the changes to these procedures, the new system of accommodation has functioned relatively satisfactorily. In the transition period from the old to the new system all the proposed changes were not implemented immediately. The new minimum cash reserve requirements, for example, only became effective on 23 April 1998. The Reserve Bank feels that it is now appropriate to set in motion the complete envisaged new system of accommodation. Two additional changes must still be introduced.Firstly, the Bank has to start issuing Reserve Bank debentures to establish a role for its own paper in the new system. These debentures will be issued in terms of Section 10(1)(i) of the South African Reserve Bank Act, Act No 90 of 1989, in multiples of R5 million. The debentures will generally have a maturity of 30 days and will be freely transferable. The first issue of debentures will take place when the Bank deems it appropriate, and full details of the issue will be announced on the Reserve Bank's wire services page (Reuters: RMBQ) on the day prior to the issue. The results of the issue will also be provided on this same page immediately after the issue has been finalised. This practice will be followed in all further issues of the Bank's debentures. Secondly, the marginal lending rate has to be adjusted to a higher level. In the transition period the marginal lending rate was fixed at the then current Bank rate of 16 per cent per annum to facilitate the changeover to the new system. For the efficient operation of the system it is, however, important that the marginal lending rate is high enough to discourage banks from making extensive use of the overnight marginal lending facility. The Reserve Bank has decided that a margin of 3 percentage points between the marginal lending rate and the repo rate should be large enough to achieve this objective.Originally it was envisaged that the marginal lending rate would be fixed at a specific level for a period of time and would only be adjusted if the margin between this rate and the repo rate became too small or too large. On reflection, the Bank has now decided to follow a more flexible approach and to allow the marginal lending rate to fluctuate in accordance with changes in the repo rate. In this way greater allowance will be made for market forces in the determination of all shorter-term interest rates. Until further notice, the marginal lending rate will accordingly as from 20 may 1998 be fixed at a level of 3 percentage points above the daily average effective rate applicable on repurchase transactions at the final daily tender. This increase in the marginal lending rate should not be interpreted as a change in monetary policy, but is only made as part of the implementation of the new accommodation procedures. Banks should not, in the normal course of business, make any extensive use of this facility, and their average cost of money should therefore not be affected by the higher marginal lending facility rate now introduced. ​