The Monetary Authority has teamed up with Euroclear Bank and JPMorgan to launch a cross-border platform to allow international banks to more easily tap yuan funds in the city.
Under a deal signed between the HKMA and the other two banks yesterday, the three parties will next Monday provide a cross-border repurchase (repo) platform that lets banks that deposit bonds into any one of them use the bonds as collateral for short-term funding in yuan, Hong Kong dollars, US dollars or euros.
Euroclear has US$28 trillion worth of assets while JPMorgan has US$17.9 trillion worth of assets deposited by other banks that could be used as collateral for lending.
HKMA deputy chief executive Peter Pang Sing-tong said the new platform is particularly important for Hong Kong as it sought to act as a leading offshore yuan trading centre.
'Under the new platform, international banks that have US treasuries or other bonds deposited in Euroclear Bank or JPMorgan can use the bonds as collateral to borrow from a Hong Kong lender in yuan or Hong Kong dollars,' Pang said.
'This would strengthen Hong Kong's role as a centre for international institutions to tap the yuan for their clients in order to settle trades or to invest in any yuan investment products. This would be useful for overseas banks as now there are an increasing number of cross-border trades settled in yuan while there are also increasing numbers of issues of yuan-denominated 'dim sum' bonds.'