China, HK Near New Renminbi Clearing Deal

The People’s Bank of China and the Hong Kong Monetary Authority are finalizing an additional arrangement for banks operating offshore renminbi business in Hong Kong.

The People’s Bank of China (PBoC) and the Hong Kong Monetary Authority are finalizing an additional arrangement for banks operating offshore renminbi business in Hong Kong, Risk.net reports. The new arrangements will include custodian accounts facing the PBoC as the counterparty instead of Bank of China (Hong Kong) (BOCHK), a commercial bank. The new custody facility will allow eligible banks to run offshore renminbi business in Hong Kong, to reduce their credit concentration exposure to BOCHK and move this exposure to China’s central bank as a credit risk backstop. The arrangement will allow the city’s participating banks in offshore renminbi to take credit risk against the PBoC rather than with clearing bank, BOCHK.

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