China’s Central Bank Pushes Reform of Emergency Liquidity Tool

Economy2 hours ago (Sep 23, 2021 11:54PM ET)

China’s Central Bank Pushes Reform of Emergency Liquidity Tool

(Bloomberg) — China’s central bank will push to reform its emergency-funding facility to make it easier for banks to access cash, a move that could help smooth out the volatility in money market rates.

The People’s Bank of China will allow application for loans via the standing lending facility to be done electronically, it said in a statement after a national video conference Thursday, an operational change that would help “stabilize market expectations” and “maintain the smooth operation of money market interest rates.”

The SLF was introduced in 2013, with loans having a maturity of overnight to one month. The rate on the loans is considered the upper bound of China’s interest rate corridor.

“The improvement in the SLF efficiency will help to avoid a liquidity crunch and strengthen the SLF rates’ role as the upper limit of a rate corridor,” said Xing Zhaopeng, senior China strategist at Australia & New Zealand Banking Group (OTC:ANZBY) Ltd. He expects an increase in liquidity injection to banks via the SLF operation in September.

The change also means there’s a smaller chance of money market rates breaching the SLF rate, he said. There have been times that the seven-day repurchase rate, the short-term borrowing cost of financial institutions, surged beyond the SLF lending rate with the same maturity, indicating banks would rather turn to each other for emergency liquidity.

The central bank said in its statement local PBOC branches should meet the reasonable liquidity needs of local financial institutions in accordance with regulations in a timely manner and effectively guard against liquidity risks.

The PBOC also urged banks to make full use of the additional 300 billion yuan ($46 billion) of re-lending quota to small firms, meet the financing demand of small and micro firms, and accelerate the process of credit extension.

Vice governor Liu Guoqiang made a speech at the conference and representatives from local branches attended.

(C)2021 Bloomberg L.P.

China’s Central Bank Pushes Reform of Emergency Liquidity Tool

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Similar Articles

Most Popular

Australia says EU postpones trade talks for second time

Economy3 minutes ago (Oct 22, 2021 07:51AM ET) By Colin Packham CANBERRA (Reuters) - Australia's trade minister said on Friday the European Union has postponed...

Take Five: ECB, FAANG and China’s bond conundrum

(C) Reuters. Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., October 21, 2021. REUTERS/Brendan McDermid (Reuters)...

Ethiopian government strikes Tigray regional capital for fourth day this week

World14 minutes ago (Oct 22, 2021 06:41AM ET) ADDIS ABABA (Reuters) -Ethiopia conducted an air strike on the capital of the northern Tigray region on...

Subscribe here