Hong Kong & Mainland China Central Banks 6 New Measures for Financial Connectivity: 1) $13 Billion (HKD 100 Billion) RMB Trade Financing Liquidity Facility for Banks in Hong Kong to Access Lower-Cost RMB Funds, 2) Enhanced Bond Connect (Southbound) with Extended Settlement Time, Multi-Currency Bonds (RMB, HKD, USD & EUR) & Expanding Eligible Mainland Investors, 3) Allowing Offshore RMB Repurchase (Repo) Using Northbound Bond Connect Bonds as Collateral, 4) Including Northbound Bond Connect Bonds as Eligible Margin Collateral at OTC Clearing Hong Kong Limited (OTCC), 5) Faster Payment Systems in Mainland China & Hong Kong, 6) Providing Hong Kong Residents Attestation Services for Account Opening in Greater Bay Area (GBA)
13th January 2025 | Hong Kong
Hong Kong & Mainland China central banks has announced 6 new measures for financial connectivity with 1) $13 billion (HKD 100 billion) RMB trade financing liquidity facility for banks in Hong Kong to access lower-cost RMB funds, 2) Enhanced Bond Connect (Southbound) with extended settlement time, multi-currency bonds (RMB, HKD, USD & EUR) & expanding eligible Mainland Investors, 3) Allowing Offshore RMB repurchase (Repo) using Northbound Bond Connect Bonds as collateral, 4) Including Northbound Bond Connect Bonds as eligible margin collateral at OTC Clearing Hong Kong Limited (OTCC), 5) Faster payment systems in Mainland China & Hong Kong, 6) Providing Hong Kong residents attestation services for account opening in Greater Bay Area (GBA). HKMA (13/1/25): “The Hong Kong Monetary Authority (HKMA) and the People’s Bank of China (PBoC) announce today (13 January) new policy measures to deepen the financial market connectivity between Hong Kong and the Mainland, and consolidate Hong Kong’s status as the global offshore RMB business hub.” Hong Kong Exchange (13/1/25): “Hong Kong Exchanges and Clearing Limited (HKEX) welcomes the announcement today (Monday) from the Securities and Futures Commission (SFC), the Hong Kong Monetary Authority (HKMA) and the People’s Bank of China to allow China Government Bonds (CGB) and Policy Bank Bonds held by international investors through Bond Connect as margin collateral for all OTC derivative transactions cleared by OTC Clear, HKEX’s clearing subsidiary. OTC Clear, which began accepting these instruments as margin collateral for Northbound Swap Connect from today, will also be accepting them as margin collateral for other derivative transactions by the end of the first quarter of 2025. OTC Clear will work closely with the SFC and the Central Moneymarkets Unit (CMU) of the HKMA to prepare for this arrangement. More details will be announced in due course. The use of CGB and Policy Bank Bonds as collateral for a wider range of derivative transactions will enhance the utility of RMB-denominated assets in the market, promoting the internationalisation of the RMB. OTC Clear provides clearing services for interest rate swaps (including China onshore interest rate swaps via Swap Connect), non-deliverable currency forwards, cross currency swaps and deliverable FX.” More info below:
“ Hong Kong & Mainland China Central Banks 6 New Measures for Financial Connectivity: 1) $13 Billion (HKD 100 Billion) RMB Trade Financing Liquidity Facility for Banks in Hong Kong to Access Lower-Cost RMB Funds, 2) Enhanced Bond Connect (Southbound) with Extended Settlement Time, Multi-Currency Bonds (RMB, HKD, USD & EUR) & Expanding Eligible Mainland Investors, 3) Allowing Offshore RMB Repurchase (Repo) Using Northbound Bond Connect Bonds as Collateral, 4) Including Northbound Bond Connect Bonds as Eligible Margin Collateral at OTC Clearing Hong Kong Limited (OTCC), 5) Faster Payment Systems in Mainland China & Hong Kong, 6) Providing Hong Kong Residents Attestation Services for Account Opening in Greater Bay Area (GBA) “
Announcement 1: The Hong Kong Monetary Authority (HKMA) and the People’s Bank of China (PBoC) announce today (13 January) new policy measures to deepen the financial market connectivity between Hong Kong and the Mainland, and consolidate Hong Kong’s status as the global offshore RMB business hub. These measures include:
- Introduction of the HKMA RMB Trade Financing Liquidity Facility: The HKMA will introduce an RMB Trade Financing Liquidity Facility for banks in Hong Kong as a stable source of relatively lower-cost RMB funds, so as to support banks in providing RMB trade finance services to their corporate customers. The new facility has a total size of RMB100 billion. The HKMA will offer 1-month, 3-month and 6-month RMB funds, with interest rates referencing onshore interest rates plus a spread. The new facility, apart from operating through repo transactions same as the existing RMB Liquidity Facility, will introduce currency swap where banks can swap their HKD funds for RMB funds with the HKMA. The HKMA will obtain the needed RMB funds from the PBoC through the Currency Swap Agreement between the two institutions. The new facility will further enhance the liquidity of Hong Kong’s offshore RMB market, meet enterprises’ increasing funding demand for RMB trade financing, and strengthen Hong Kong’s leading position as the global offshore RMB business hub. Details of the facility will be announced by the HKMA in due course, with the launch expected to take place by late February.
- Further enhancement and expansion of Bond Connect (Southbound): Building on the smooth operation of Southbound Bond Connect, the HKMA and the PBoC will jointly implement a series of enhancement and expansion measures, including:
- Extending the settlement time under the Central Securities Depositories (CSDs) linkage;
- Supporting the settlement of multi-currency bonds in RMB, Hong Kong dollar, US dollar and euro through the CSDs linkage; and
- Further out, expanding the scope of eligible Mainland investors in due course.
- These measures will further broaden the overseas investment channels for Mainland institutional investors, address their needs for diversified asset allocation, and improve transaction and settlement efficiency. They will also bolster the development of the Hong Kong bond market, particularly the Dim Sum bond market.
- Offshore RMB repurchase (repo) using Northbound Bond Connect bonds as collateral: The HKMA supports developing offshore RMB repo business using Northbound Bond Connect bonds as collateral, with a view to establishing a market-based arrangement for offshore RMB liquidity management that will enhance Hong Kong’s competitiveness as an offshore RMB business hub. This business will be launched soon. For more details, please refer to the HKMA press release.
- Inclusion of Northbound Bond Connect bonds as eligible margin collateral at OTC Clearing Hong Kong Limited (OTCC): The HKMA, the PBoC, and the Securities and Futures Commission have reached consensus to support offshore investors to use onshore bonds issued by the Ministry of Finance and Mainland policy banks that are held under Northbound Bond Connect as eligible margin collateral for derivative transactions at the OTCC. Further details will be announced in due course. In recent years, relevant financial regulators in both the Mainland and Hong Kong have been working closely to actively promote the use of onshore RMB bonds as eligible collateral in offshore markets. Starting from February 26, 2024, the HKMA has expanded the list of eligible collateral for the HKMA’s RMB Liquidity Facility to include RMB bonds issued onshore by the Ministry of Finance and the policy banks on the Mainland. In July 2024, relevant authorities in Hong Kong and the Mainland announced further support for offshore investors to use onshore bonds held under Bond Connect as margin collateral for Northbound Swap Connect. This measure was officially implemented on 13 January, 2025. The new measures announced today will help further reduce the cost of RMB business for market participants, enhance capital efficiency, and vitalise offshore investors’ onshore bond holdings, thereby enhancing the attractiveness of onshore bonds and RMB assets to investors.
- Cross-boundary payment facilitation: The HKMA and the PBoC are working closely together to implement the linkage of faster payment systems in the Mainland and Hong Kong (i.e. the Mainland’s Internet Banking Payment System (IBPS) and Hong Kong’s Faster Payment System (FPS)). This linkage, which operates 24×7, can support residents in both places in making real-time, small-value, cross-boundary remittances, by entering the recipient’s mobile number or account number. Some services are expected to be launched around mid-2025. Subject to the experience gained upon implementation, the service will be gradually enhanced over time. This will help support broader economic cooperation and exchange between the two places. In addition, to address frequently asked questions from the industry and the public regarding cross-boundary remittance services, the HKMA has just published an FAQ clarifying and explaining the current policy arrangements for various cross-boundary remittance scenarios.
- GBA financial facilitation: The HKMA welcomes the inclusion of new participating banks by the PBoC to offer account opening by attestation services for Hong Kong residents, providing Hong Kong residents with higher-quality and more convenient payment service for consumption, everyday life, and commute on the Mainland.
Announcement 2: The Hong Kong Monetary Authority (HKMA) announced today (13 January) the arrangement for offshore RMB bond repurchase (repo) business (offshore repo arrangement) to further enhance the market-based arrangement for offshore RMB liquidity management and increase Hong Kong’s competitiveness as an offshore RMB business hub. Under the offshore repo arrangement, Northbound Bond Connect participants can use eligible onshore bonds as collateral to conduct RMB repo business in Hong Kong. The business is scheduled to commence soon. To facilitate a smooth launch of this business, it is hereby announced that:
- Participating Institutions:
- All existing Northbound Bond Connect investors, including Central Moneymarkets Unit (CMU) members and offshore investors with CMU sub-accounts opened through Hong Kong custodian banks that are CMU members.
- Eligible Bonds:
- Bonds held by participating institutions under Northbound Bond Connect, regardless of bond type.
- Market Maker Arrangement:
- In the initial phase, 11 Primary Liquidity Providers designated by the HKMA1 will serve as market makers. Each repo transaction must involve at least one of these market makers as a counterparty.
- Transaction and Settlement Arrangements:
| 5 (a) | 6 Master Agreement: Participants may choose their own repo agreement template (e.g., Global Master Repurchase Agreement (GMRA) or National Association of Financial Market Institutional Investors (NAFMII)’s Bond Repurchase Master Agreement, etc.). |
| 7 (b) | 8 Trading Arrangement: Transactions may be conducted:
1bilaterally over-the-counter (OTC); 2in the same manner as existing Northbound Bond Connect transactions, and via the linkage between the Central Securities Depositories (CSDs) in the onshore and offshore markets; 3through offshore electronic trading platforms; 4through onshore electronic trading platform; |
| 9 (c) | 10 Settlement Arrangement: Settlement will be completed under the Repo Service by CMU. |
11To ensure a smooth operation of the business, leverage limits will be introduced during the initial phase. Specifically, bond ownership will be transferred to the repo buyer during the repo period, but the repo buyer will not be permitted to re-use the bonds during the repo period (the bonds will be locked and managed by the CMU platform). In the future, the HKMA will review the operation and experience of the offshore repo arrangement and make further adjustments as needed.
- Data Reporting:
- Market makers are required to report transaction data2 to the HKMA on the same day of the transaction for market monitoring purposes. The HKMA will further communicate with the market makers to finalise the reporting requirements and submission channels.
The operational details for bond transfer and settlement will be announced by CMU at a later date. After the launch of the offshore RMB repo business, the HKMA will continue to closely monitor market conditions to ensure orderly market operations. The HKMA will also maintain communication with the industry and review and adjust the arrangement as appropriate to support the robust and sustainable development of offshore RMB business.
Notes:
- Including 1) Agricultural Bank of China Limited, 2) Bank of China (Hong Kong) Limited, 3) Bank of Communications Co., Ltd., 4) BNP Paribas, 5) China CITIC Bank International Limited, 6) China Construction Bank (Asia) Corporation Limited, 7) Citibank, N.A., 8) Hang Seng Bank Limited, 9) The Hongkong and Shanghai Banking Corporation Limited, 10) Industrial and Commercial Bank of China (Asia) Limited, 11) Standard Chartered Bank (Hong Kong) Limited
- The specific information to be reported includes: names of the trading institutions (including both the repo party and the reverse repo party), total amount of funds borrowed by the repo party, bond name, bond code, repo term, total face value, repo rate, transaction date, etc.
Hong Kong & China Central Banks Announce 6 New Financial Cooperation Measures: RMB Bonds Added to List of Eligible Collateral for Hong Kong RMB Liquidity Facility, Opens Repo Market to All Foreign Institutional & Bond Connect Investors, Amendments to Wealth Management Connect Pilot Scheme, New Measures for Mainland China Property Purchase Remittances by Hong Kong & Macao Residences, Cross-Boundary Credit Referencing & Cross-Boundary e-CNY Pilots in Hong Kong
25th January 2024 – Hong Kong & China central banks, the Hong Kong Monetary Authority (HKMA) and the People’s Bank of China (PBoC), have announced 6 new financial cooperation measures: 1) RMB bonds added to list of eligible collateral for Hong Kong RMB liquidity facility, 2) Opens Repo market to all foreign institutional & bond connect investors, 3) Amendments to Wealth Management Connect Pilot scheme, 4) New measures for Mainland China property purchase remittances by Hong Kong & Macao residences, 5) Cross-Boundary credit referencing, and 6) Cross-Boundary e-CNY pilots in Hong Kong. Eddie Yue, Chief Executive of the HKMA: “We are pleased to see the announcement of the six measures. They will promote further opening up of the Mainland’s financial market, strengthen Hong Kong’s status as an international financial centre and offshore RMB business hub, and foster closer connections within the GBA. The announcement is the result of the concerted effort of the HKMA, the PBoC and other relevant financial regulatory authorities in the Mainland and Hong Kong. We will continue to work closely with them and the industry to ensure timely and smooth implementation of these measures, and explore further enhancements.” More info below:
Hong Kong & China Central Banks Announce 6 New Financial Cooperation Measures
24th January 2024 – The Hong Kong Monetary Authority (HKMA) and the People’s Bank of China (PBoC) announce today (24 January) six policy measures to deepen the financial cooperation between Hong Kong and the Mainland, including:
- Expanding the list of eligible collateral for the HKMA’s RMB Liquidity Facility to include RMB bonds issued onshore by the Ministry of Finance of the People’s Republic of China and the policy banks of the People’s Republic of China;
- Further opening up the onshore repurchase agreement (repo) market to all foreign institutional investors (including Bond Connect investors) that already have access to the China Interbank Bond Market;
- Releasing the amendments to the Implementation Arrangements for the Cross-boundary Wealth Management Connect Pilot Scheme in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA);
- Implementing facilitative measures on the remittances for property purchase by Hong Kong and Macao residents in the Mainland cities in the GBA;
- Promoting the collaboration on cross-boundary credit referencing to facilitate corporates’ cross-boundary financing activities;
- Expanding the cross-boundary e-CNY pilots in Hong Kong
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