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Hong Kong Monetary Authority announced two upgrades in the provision of renminbi liquidity to authorized institutions participating in renminbi business in Hong Kong on Thursday, including the provision of overnight funds available on the same day, which will take effect from Friday.
Under the existing liquidity facility, the authority provides one-week renminbi funds to participating authorized institutions against eligible collateral, with funds available on a next day basis (T+1).
It said in addition to providing funds of one-week tenor on T+1 basis, the existing facility will provide one-day funds which will also be available on the next day (T+1). It will continue to make use of the Swap Agreement with People's Bank of China in providing such funds.
Overnight funds, available on the same day (T+0), will be provided to help banks meet their liquidity needs. The authority will use its own source of renminbi funds in the offshore market to provide such lending, and expects the amount of overnight funds to be provided will be up to RMB10 billion in total on a single day.
The authority's Chief Executive Norman Chan said that the introduction of two enhancements to the renminbi liquidity facility will strengthen liquidity management of banks participating in the renminbi business and support Hong Kong's further development as the hub for offshore renminbi business.
Participating authorized institutions are welcomed to use the facility to meet short-term funding needs. However, they are advised to plan their funding ahead of time and avoid over- dependence on the renminbi liquidity facility. The authority will review the facility's terms and conditions in light of the actual operating experience.
