PBOC Signed Agreement with BIS to Establish Renminbi Liquidity Arrangement

The PBOC (People's Bank of China) has signed an agreement with the BIS (Bank for International Settlements) to establish a Renminbi Liquidity Arrangement (RMBLA) that will provide support to participating central banks in times of market fluctuations.

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Each participating central bank contributes a minimum of RMB 15 billion or US dollar equivalent, in RMB or USD, placed with the BIS, creating a reserve pool.

Reserve pooling allows participating central banks to draw down on their own contributions, as well as gain access to additional funding through a collateralised liquidity window operated by the BIS up to an amount equivalent to their share of the collateralised liquidity window.

The HKMA (Hong Kong Monetary Authority), MAS (Monetary Authority of Singapore), BNM (Bank Negara Malaysia), Bank Indonesia, and Banco Central de Chile are included in the initial group of participating central banks.

The arrangement will complement existing BIS liquidity facilities in providing additional liquidity access to participating central banks in times of market volatility, hence contributing to financial stability, the BIS said.

The BIS has over time worked with central banks to assist in the implementation of liquidity support packages provided to their counterparts to protect against market stresses and safeguard financial stability.

The RMBLA marks China's latest step to push the internationalisation of its currency.