China to set up central bank bills swap to support liquidity of banks’ perpetual bonds
- The plan aims to encourage banks to replenish capital through perpetual bond issuance, said the People’s Bank of China
China’s central bank plans to set up a central bank bills swap (CBS) to improve the liquidity of banks’ perpetual bonds, it said on Thursday.
The set-up of the CBS also aims to encourage banks to replenish capital through perpetual bond issuance, the People’s Bank of China said in a statement on its website.
Banks’ perpetual bonds with ratings at no lower than “AA” will be included as qualified collateral for a medium-term lending facility, a targeted medium-term lending facility, a standing lending facility and re-lending, according to the statement.
The move comes two days after Bank of China, the state-owned commercial bank, said it plans to issue as much as 40 billion yuan (US$5.89 billion) in perpetual bonds, the first ever issuance of such debt by a lender in China, to improve its capital buffers.
It also represents the Chinese central bank’s latest efforts aimed at spurring lending to private companies and supporting a slowing economy.
On Wednesday, the central bank injected 257.5 billion yuan (US$37.9 billion) into the money market through a targeted medium-term lending facility, a new tool it created last month.
Additional reporting by Laura He
