HONG KONG - A temporary US dollar liquidity facility was introduced on Wednesday to licensed banks in Hong Kong to help alleviate tight liquidity in global US dollar interbank money markets, according to the Hong Kong Monetary Authority (HKMA).
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Amid considerable volatility and uncertainty in global financial markets brought about by the spread of coronavirus infections, the HKMA is using funds obtained through the Federal Reserve's FIMA Repo Facility1 to introduce the facility. It is designed to help alleviate tightness in the global US dollar interbank money markets, the HKMA said in a statement.
Meanwhile, the HKMA will delay this year’s banks stress test to next year so that banks can focus their resources on tackling more imminent challenges
A total of US$10 billion (HK$78 billion) is currently available under the facility. United States dollar liquidity will be provided to licensed banks through competitive tenders in the form of repurchase transactions for a term of seven days - to be settled the day after the tender.
Starting from May 6, the HKMA will conduct a tender every week (normally on Wednesday). For each tender, each bank may submit one valid bid, which must be at least US$100 million and an integral multiple of US$100 million.
The HKMA will contact banks with successful bids to confirm and arrange transfer of eligible assets as collateral to the HKMA. Allotments are subject to successful transfers of collateral to the HKMA and successful transfers of US dollar liquidity from the Federal Reserve to the HKMA. Tender notices and tender results will be published on a designated page of the HKMA website. The names of banks participating in the tenders or those allotted with funds, and individual allotment amounts will not be disclosed, according to the statement.
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The HKMA may at any time revise the parameters of the facility if necessary, taking into account factors such as market conditions and use of the facility. The HKMA’s intention is to maintain the facility until Sept 30 of this year.
Meanwhile, the HKMA will delay this year’s banks stress test to next year so that banks can focus their resources on tackling more imminent challenges, Chief Executive Eddie Yue said in a separate statement. The regulator is also considering extending the principal moratorium to government-subsidized home loans, according to the statement.
With Bloomberg inputs
