On Feb. 7, 2025, HKMA announced RMB trade financing liquidity facility will officially launch on Feb. 28, 2025; aims to provide stable, longer-term, lower-cost RMB liquidity.
The interest rate is based on SHIBOR + 25 basis points; participating banks interested in applying for a quota are invited to submit required information to HKMA by Feb. 17.
Quota allocation will follow a phased approach, considering banks' business needs.
Participating banks must ensure proper governance of funds for RMB trade finance.
On Jan. 13, HKMA issued new measures re financial connectivity.
HKMA announced new measures to deepen financial market connectivity with mainland China and consolidate Hong Kong's status as the global offshore RMB business hub.
Overview of Measures
HKMA launching RMB 100bn trade financing liquidity facility offering 1-month, 3-month, 6-month RMB funds to banks; in addition to introducing currency swap option where banks will be able to swap their HKD funds for RMB funds with the HKMA.
Enhancement and expansion of Bond Connect (Southbound), extending settlement time under Central Securities Depositories (CSD) linkage; supporting the settlement of multi-currency bonds denominated in RMB, HKD, USD, EUR through the CSD linkage.
Expanding eligible mainland investor scope for southbound trading; supporting offshore RMB repurchase (repo) using Northbound Bond Connect bonds as collateral.
Northbound Bond Connect bonds eligible margin collateral at OTC Clearing Hong Kong.
Repo Business Framework
All existing Northbound Bond Connect investors eligible to participate; eleven designated primary liquidity providers to serve as market makers; transactions permitted through bilateral over the counter, CSD linkage, or electronic platforms.
Leverage limits and bond re-use restrictions will be introduced in the initial phase.
Cross-Border Payments
HKMA and CHI CB are working closely together to link the mainland's Internet Banking Payment System (IBPS) with Hong Kong's Faster Payment System (FPS) by mid-2025.
HK SFC Press Release
On the same date, HK SFC said it welcomed expanded acceptance of Northbound Bond Connect mainland onshore bonds as margin collateral at OTC Clearing Hong Kong.
Agreement reached between SFC, CHI CB, HKMA to extend bond collateral usage to all eligible derivative transactions cleared in OTC Clearing Hong Kong (OTC Clear).
Measure aims to reduce liquidity costs for global institutional investors, allow more efficient use of onshore RMB bonds as non-cash collateral, and additionally support Hong Kong's development as an offshore RMB hub and fixed income market.
On the same date, HKEX said it welcomed the above acceptance of mainland bonds.
Feb. 2025 Launch of Facility
On Feb. 7, 2025, HKMA announced RMB trade financing liquidity facility will officially launch on Feb. 28, 2025; aims to provide stable, longer-term, lower-cost RMB liquidity.
The interest rate is based on SHIBOR + 25 basis points; participating banks interested in applying for a quota are invited to submit required information to HKMA by Feb. 17.
Quota allocation will follow a phased approach, considering banks' business needs.
Participating banks must ensure proper governance of funds for RMB trade finance.
