People's Daily Online, Beijing, June 27 (Reporter Luo Zhizhi) Recently, the People's Bank of China and the Bank for International Settlements (BIS) signed an agreement to participate in the RMB Liquidity Arrangement (RMBLA).
The RMB Liquidity Arrangement is a financial institutional arrangement initiated and designed by the Bank for International Settlements, which aims to provide liquidity support to the central banks participating in the arrangement when the financial market fluctuates by building a reserve fund pool.
According to reports, the People's Bank of China actively participated in the design of the arrangement, and the other first batch of participants include the Central Bank of Indonesia, the Central Bank of Malaysia, the Hong Kong Monetary Authority, the Monetary Authority of Singapore and the Central Bank of Chile.
The RMB liquidity arrangement is jointly funded by all the participating parties, and the paid-in capital of all parties shall not be less than RMB 15 billion or the equivalent in USD. When there is a demand for liquidity, in addition to withdrawing its capital contribution, participants can also borrow short-term funds from the reserve pool with qualified collateral.
The People's Bank of China stated that participating in the RMB liquidity arrangement will help strengthen cooperation with the Bank for International Settlements, meet the reasonable demand for RMB in the international market, and make positive contributions to strengthening the regional financial safety net.
The BIS said the reserve pool arrangement could provide additional liquidity support to participating central banks. Not only can these central banks withdraw their subscribed shares under this arrangement, but they can also borrow additional funds through the collateralized liquidity window operated by the Bank for International Settlements. The maximum additional amount that can be borrowed is equal to that central bank’s share of the collateralized liquidity window.
"This financial institutional arrangement is similar to a mutual fund pool jointly funded by central banks in various regions. Once the international financial market fluctuates violently, participants can easily obtain RMB liquidity support according to relevant rules.
" Macro researcher of the Financial Market Department of China Everbright Bank Zhou Maohua said that my country's central bank has actively participated in the design of the arrangement, which has strengthened my country's cooperation with international financial organizations and central banks in other regions, which will help improve my country's ability to participate in international financial governance and enhance my country's voice in international financial governance.
At the same time, the institutional arrangement reflects that countries pay more attention to the security of RMB liquidity, which will help to further promote the internationalization of RMB.