Hong Kong Monetary Authority moves to steady ship amid protests, US-China trade war, introduces new funding facility for city’s banks

Hong Kong Monetary Authority, the city’s de facto central bank, has introduced new ways in which the city’s lenders can borrow from it, a move aimed at strengthening the banking system at a time of unprecedented social unrest.

The new measures also enhance the current system banks can use to borrow from the monetary authority should they face an unexpected liquidity crunch, it said in a circular to all banks on Monday.

“This is part of our ongoing work to maintain the integrity and stability of the monetary and financial systems of Hong Kong,” Norman Chan, the HKMA’s chief executive, said in a statement.

“The [updated Liquidity Facilities Framework] outlines the facilities that are already in place, as well as the newly introduced resolution facility, in a systematic way so as to foster a better understanding of the different ways that liquidity may be made available to banks by the HKMA,” he said.

The new resolution facility can be used when the monetary authority takes control of a bank in difficulty. Under this facility, the HKMA will use several channels to inject liquidity into a bank and ensure it has money to settle its dealings with other parties. The facility can last until operations at the bank return to normal.

There are three other ways through which banks can get funds from the HKMA, which have been enhanced by the new measures. In the first two facilities – the settlement facility and standby liquidity facility – banks can access overnight funds, or for up to a month, for settlement purposes.