Enhancements to the Renminbi (RMB) Liquidity Facility

25 July 2013
The Chief Executive
All Authorized Institutions
Dear Sir/Madam,
Renminbi (RMB) Liquidity Facility
The HKMA announced today two enhancements to the operation of the RMB liquidity facility with effect from 26 July 2013. In the light of the continued development of the offshore RMB market in Hong Kong, the HKMA introduces two enhancements of the facility as follows:

1. In addition to providing funds of 1-week tenor on T+1 basis, the existing
   facility will provide one-day funds which will also be available on the next day (T+1). HKMA will continue to make use of the Swap Agreement with People’s Bank of China in providing such funds.
2. Overnight funds, available on the same day (T+0), will be provided to help
   banks meet their liquidity needs. The HKMA will use its own source of RMB funds in the offshore market to provide such lending, and expects the amount of overnight funds to be provided will be up to 10 billion RMB in total on a single day. The terms and conditions of the enhanced facility are attached at the Annex. Participating AIs are welcome to use the facility to meet short-term funding needs. Nonetheless, they are advised to plan their funding ahead of time and avoid over-dependence on the RMB liquidity facility. The HKMA will review the terms and conditions of the facility in light of actual operating experience. Yours faithfully, ( Howard Lee ) Executive Director Monetary Management Department

Annex
Terms and Conditions of the RMB Liquidity Facility Tomorrow/1-Week (1-week funds available next day) Tomorrow/Next (1-day funds available next day) Overnight (1-day funds available same day) Tenor One week One day One day Interest rate By reference to prevailing market interest rates Eligible collateral

• Exchange Fund Bills and Notes
• HKSAR Government bonds
• RMB denominated bonds issued in Hong Kong by the Ministry of
  Finance of the People’s Republic of China Haircut on eligible collateral
• 5% for securities with remaining maturity at 1 year or below
• 10% for securities with remaining maturity at 5 years or below but over
  1 year
• 20% for securities with remaining maturity over 5 years
  Banks eligible (1)
  AIs participating in RMB business (Participating AIs) Cut-off time for request 12:00 noon on each Hong Kong business day (not available on mainland China holidays) 3:00 pm on each Hong Kong business day Contact details Participating AIs interested in borrowing RMB funds should contact the dealing room of the HKMA at 2878 8104 or Reuters dealing code EFHK Settlement On T+1, RMB funds will be credited to the Participating AI’s RMB RTGS account held with the Clearing Bank subject to the receipt of the securities by the HKMA before CMU cut-off at 4:00 pm On T+0, RMB funds will be credited to the Participating AI’s RMB RTGS account held with the Clearing Bank subject to the receipt of the securities by the HKMA before CMU cut-off at 4:00 pm Holiday If the value date or maturity date of the transaction falls on a Hong Kong or China holiday, it will be delayed to the next business day which is not a holiday in Hong Kong and China. If the maturity date of the lending falls on a Hong Kong holiday, it will be delayed to the next Hong Kong business day. Note (1): Participating AIs are required to have signed with the HKMA the Master Sale and Repurchase Agreement for the provision of liquidity assistance including lender-of-last-resort support and RMB liquidity facility