Renminbi Liquidity Facility Expansion of Collateral

2 November 2017
The Chief Executive
All Authorized Institutions
Dear Sir/Madam,
Renminbi (RMB) Liquidity Facility – Expansion of Collateral The Hong Kong Monetary Authority (HKMA) announced that the list of eligible collateral for the RMB Liquidity Facility will be expanded to include the US dollar denominated bonds issued in Hong Kong by the Ministry of Finance of the People’s Republic of China on 2 November 2017 with a total issuance size of USD2 billion, including USD1 billion of 5-year bonds and USD1 billion of 10-year bonds. This new arrangement will take effect from today. The revised terms and conditions for the RMB Liquidity Facility are set out in the Annex. Should you have any questions on the above, please contact the HKMA at 2878 8104. Yours faithfully, Henry Cheng Executive Director (Monetary Management) Encl.

Annex
RMB Liquidity Facility
Terms and Conditions

1. Overnight Repo
   Banks eligible(1)
   AIs participating in RMB business (Participating AIs) Eligible collateral

• Exchange Fund Bills and Notes (EFBN)
• HKSAR Government bonds (HKGB)
• RMB denominated bonds issued in Hong Kong by the Ministry of Finance of
  the People’s Republic of China (CMOF)
• RMB denominated bonds issued in London by the CMOF on 2 June 2016
  (ISIN: XS1425436729)
• USD denominated bonds issued in Hong Kong by the CMOF on 2 November
  2017 (ISIN: XS1706605109 and XS1706605281)
• RMB denominated bonds issued in Hong Kong by policy banks of the
  People’s Republic of China, including Agricultural Development Bank of China, China Development Bank, and Export and Import Bank of China Haircut on collateral
• EFBN and HKGB: 2% per year of remaining maturity, plus 2% (for
  cross-currency haircut)
• CMOF and China policy bank bonds denominated in RMB: 2% per year of
  remaining maturity, minimum 2%
• CMOF bonds denominated in USD: 2% per year of remaining maturity,
  minimum 2%, plus 2% (for cross-currency haircut) Interest rate Average of the most recent 3 TMA overnight CNH HIBOR fixings, inclusive of the fixing on the same day (or the average of the nearest 3 preceding fixings if there is no fixing on the same day), plus 50 bps, subject to a minimum at 0.50% Mode of operation
• Participating AIs interested in borrowing RMB overnight funds should
  contact the dealing room of the HKMA at 2878 8104 or Reuters dealing code EFHK
• After confirming the deal with the HKMA, Participating AIs should input the
  repo transactions via the CMU Member Terminal (CMT) (see details in operating procedures of the CMU (2))
• Participating AIs should reverse the repo via CMT before 2:00pm the next
  operating day, except for Saturdays and Sundays Operating hours
• Request for repo should be made before 6:00pm on each Hong Kong business
  day
• The input of the repo deal via CMT should be completed before 6:30pm
  Holiday If the repurchase date of an overnight repo falls on a Hong Kong holiday and there are insufficient funds in the account of the Participating AI for the repurchase, the outstanding repo will be rolled over to the following operating day (see details in operating procedures of the CMU (2)) Interest payment Interest will be debited from the Participating AIs’ RMB RTGS accounts held with the Clearing Bank after the end of an operating day on which the Participating AIs repurchase the securities. Notes:
  (1) Participating AIs are required to have signed a bilateral Master Sale and Repurchase Agreement with the HKMA. (2) CMU operating procedures include CMU Reference Manual and relevant circulars issued by the HKMA from time to time.

2. One-day and One-Week Repo (T+1 Settlement)
   Banks eligible(1)
   AIs participating in RMB business (Participating AIs) Eligible collateral

• Exchange Fund Bills and Notes (EFBN)
• HKSAR Government bonds (HKGB)
• RMB denominated bonds issued in Hong Kong by the Ministry of
  Finance of the People’s Republic of China (CMOF)
• RMB denominated bonds issued in London by the CMOF on 2 June
  2016 (ISIN: XS1425436729)
• USD denominated bonds issued in Hong Kong by the CMOF on 2
  November 2017 (ISIN: XS1706605109 and XS1706605281)
• RMB denominated bonds issued in Hong Kong by policy banks of the
  People’s Republic of China, including Agricultural Development Bank of China, China Development Bank, and Export and Import Bank of China Haircut on eligible collateral
• EFBN and HKGB: 2% per year of remaining maturity, plus 2% (for
  cross-currency haircut)
• CMOF and China policy bank bonds denominated in RMB: 2% per year
  of remaining maturity, minimum 2%
• CMOF bonds denominated in USD: 2% per year of remaining maturity,
  minimum 2%, plus 2% (for cross-currency haircut) Interest rate By reference to prevailing market interest rates Mode of operation
• Participating AIs interested in borrowing RMB funds should contact the
  dealing room of the HKMA at 2878 8104 or Reuters dealing code EFHK
• 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 4:00 pm Operating hours Request for repo should be made before 12:00 noon on each Hong Kong business day (not available on mainland China holidays) Holiday If the value date or maturity date of the transaction falls on a Hong Kong or mainland China holiday, it will be delayed to the next business day which is not a holiday in Hong Kong and mainland China. Notes:
  (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

3. Intraday Repo
   Banks eligible(1)
   AIs participating in RMB business (Participating AIs) Eligible collateral

• Exchange Fund Bills and Notes (EFBN)
• HKSAR Government bonds (HKGB)
• RMB denominated bonds issued in Hong Kong by the Ministry of
  Finance of the People’s Republic of China (CMOF)
• RMB denominated bonds issued in London by the CMOF on 2 June
  2016 (ISIN: XS1425436729)
• USD denominated bonds issued in Hong Kong by the CMOF on 2
  November 2017 (ISIN: XS1706605109 and XS1706605281)
• RMB denominated bonds issued in Hong Kong by policy banks of the
  People’s Republic of China, including Agricultural Development Bank of China, China Development Bank, and Export and Import Bank of China Haircut on eligible collateral
• EFBN and HKGB: 2% per year of remaining maturity, plus 2% (for
  cross-currency haircut)
• CMOF and China policy bank bonds denominated in RMB: 2% per
  year of remaining maturity, minimum 2%
• CMOF bonds denominated in USD: 2% per year of remaining
  maturity, minimum 2%, plus 2% (for cross-currency haircut) Interest rate • Average of the most recent 3 TMA overnight CNH HIBOR fixings, inclusive of the fixing on the same day (or the average of the nearest 3 preceding fixings if there is no fixing on the same day), subject to a minimum of 0%
• To be charged based on the actual time used during the day on a per
  minute basis
  Mode of operation
• Participating AIs may initiate intraday repo transactions with the
  HKMA via the CMU Member Terminal (CMT)
• Intraday repo not repaid before the end of an operating day (i.e. 5:00
  am the next calendar day) will be converted into overnight repo, and subject to full overnight interest charge. Interest charge on the relevant intraday repo will be waived. The converted overnight repo should be repaid before 2:00 pm on the next operating day, except for Saturdays and Sundays. (See details in operating procedures of the CMU (2)) Operating hours On each operating day of RMB RTGS which spans from 8:30 am to 5:00 am the next calendar day, except for Saturdays and Sundays Interest payment Interest will be debited from the Participating AIs’ RMB RTGS accounts held with the Clearing Bank after the end of an operating day on which the Participating AIs repurchase the securities. Note:
  (1) Participating AIs are required to have signed a bilateral Master Sale and Repurchase Agreement with the HKMA. (2) CMU operating procedures include CMU Reference Manual and relevant circulars issued by the HKMA from time to time.