Hong Kong Monetary Authority said the yuan trade finance liquidity arrangement will be launched on February 28, inviting expressions of interest and quota requirements from banks.
HKMA chief executive Eddie Yue Wai-man said that after discussion with the People's Bank of China, it plans to utilize the currency swap agreement to launch the yuan trade finance liquidity arrangement, which supports banks in providing yuan loans to enterprises.
The total amount of the entire arrangement is 100 billion, which is about 10 percent of the yuan-settled capital pool in Hong Kong and is of considerable scale.
Banks can borrow funds for one month, three months and six months. Compared with the HKMA's current arrangement for short-term yuan liquidity of up to seven days, the scheme has largely ensured the stability of the funding source and is basically sufficient to cover most of the maturities required for trade financing.
Yue added that the interest paid by banks to the HKMA is based on the onshore yuan market rate plus 0.25 percent, which maintains the market-oriented element of the interest rate. It can provide a more stable and lower-cost funding for banks, which in turn will be conducive to enterprises' obtaining trade financing at a lower interest rate for their loans.
To enable more banks in Hong Kong to participate in the scheme, the HKMA will issue quotas to participating banks in phases according to their business needs and plans.
The banks will not be limited to providing trade finance to local enterprises, but will also be able to lend to overseas enterprises, thereby further consolidating Hong Kong's position as a global offshore yuan hub.
STAFF REPORTER
HKMA. SING TAO
