The People's Bank of China (PBOC), the country's central bank, has decided to establish the Bond Market Non-Bank Financial Institution (NBFI) Swap Facility to maintain stability in the bond market, it said in a statement on Monday.
The central bank said in the statement posted on its official website that under specific scenarios where asset management institutions face collective liquidity risks and where the bond market experiences systemic pressure, it will support bank wealth management subsidiaries and public fund managers (or their respective parent banks, securities parent companies, among others) with systemic significance in borrowing central bank bills from the PBOC for market repurchase financing.
These funds will be used to purchase eligible bonds or shares of publicly offered products subject to redemption by the company (or its asset management subsidiary), which will then be pledged as collateral to the PBOC, said the statement.
Participating institutions must continuously meet the prudential management requirements of the financial markets and uphold market discipline, it said.
China's central bank decides to set up NBFI Swap Facility to keep bond market stable
