BANK OF FINLAND TO TRADE IN BANKS' CERTIFICATES The Bank of Finland said it has started dealings in banks' certificates of deposits (CDs) with immediate effect and that it was prepared to issue its own paper to stimulate operations on the domestic money market. Bank of Finland Governor Rolf Kullberg told a news conference the Bank will also limit credits on the call money market from March 30, 1987, by introducing a maximum credit amount and a penalty rate if banks exceed this ceiling. "The recent introduction of three-month money and these new regulations are decreasing the role of the call money market and the discount rate as monetary instruments," Kullberg said. Bankers welcomed the central bank measures saying these were needed to accelerate the domestic money market. The Bank of Finland had never before been allowed to issue its own CDs, they said. "The central bank for the first time has an instrument with which it really can influence the price of money in this country," one banker said. Under the new rules banks are limited to call money credits to a maximum of 7.5 pct of the total of their equity capital and cash reserves. A penalty rate of interest of 19 pct is now introduced if the limit is exceeded. Director Sixten Korkman at the Bank of Finland's monetary department said he expected the bank to pursue an active policy on the interbank market as an issuer of own-CDs. "We are free to do it, so maybe on Monday we will issue the first, just to see how the system functions. Overall I think we will issue at least a few times a week," Korkman told Reuters. He said the bank was likely to aim at CDs with a three-month maturity at first as the market was best developed for paper of that maturity. The Bank of Finland introduced last December three-month credits and deposits at rates determined by the central bank and the commercial banks as a shift away from the traditional overnight call money market. Liquidity on the call credit market has fallen from around nine billion markka in early December to 167 mln last week, while three-month credits have risen to three to four billion. On the interbank market there has been an increasing trade in banks' CDs, estimated to be some eight billion markka. In addition, commercial paper accounts for around five billion markka and Treasury Bills two billion.