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Swap Facility, Not Direct Money Injection, Not to Expand Base Monetary Policy Scale: Sources Close to PBOC
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The People's Bank of China (PBOC) decided to establish the “Securities, Funds and Insurance Companies Swap Facility (SFISF)”, with an initial operating scale of RMB500 billion, according to a report in China Securities Journal. Sources close to the central bank revealed that the Swap Facility is not a direct cash injection and will not expand the scale of monetary policy. Prevailing PBOC regulations stipulated that the central bank is not allowed to directly provide loans to non-bank financial institutions. The SFISF adopts a “bond-for-bond” approach, which not only enhances the financing capabilities of non-bank institutions, but also avoids funding non-bank institutions directly. The PBOC announced the setup of the SFISF, which aims to support eligible securities, funds and insurance companies to swap high-grade liquid assets, such as treasury bonds and central bank bills, from the PBOC with pledges of assets, such as bonds, stock ETFs and constituent stocks of the CSI 300 Index. The initial operating scale is RMB500 billion, which may be further expanded in the future subject to situation. AAStocks Financial News |
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