On 07 Feb 2025, the HKMA introduced the RMB Trade Financing Liquidity Facility (RMB TFLF) to provide authorized institutions with a stable RMB funding source for trade finance services, launching on 28 February 2025 with up to RMB100 billion in capacity. The facility, accessible via repo or cross-currency swaps at SHIBOR+25bps, requires strict adherence to usage for in-scope trade finance, with phased implementation and robust oversight controls mandated for participating institutions.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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Policy Objective
On 07 Feb 2025, the Hong Kong Monetary Authority (HKMA) introduced the Renminbi Trade Financing Liquidity Facility (RMB TFLF) for authorized institutions (Als), establishing a stable source of RMB funds to support RMB-denominated trade finance services to corporate customers. The facility aims to enhance offshore RMB market liquidity, meet growing demand for RMB trade finance, and strengthen Hong Kong's position as the global offshore RMB business hub.
Facility Terms
The RMB TFLF will launch on 28 February 2025 with a total size of up to RMB100 billion, offering tenors of 1, 3, and 6 months. Funding will be provided via repurchase agreements (repo) or RMB/HKD cross-currency swaps at an interest rate of SHIBOR plus 25 basis points. Settlement occurs on T+1, with eligible collateral mirroring the existing RMB Liquidity Facility. Parameters may be revised based on market needs.
Scope and Quota Arrangement
Participating Als must be assigned a quota by the HKMA to access the facility, with applications due by 17 February 2025. Funds must be used exclusively for in-scope RMB trade finance (booked in Hong Kong under MA(BS)16 items 14.2a or 15.2), excluding unpaid pre-launch trade finance and interbank transactions. Als must implement governance controls to ensure funds are used solely for trade finance, with designated senior executives overseeing compliance.
Phased Implementation
The HKMA will adopt a phased approach, with Phase 1 launching on 28 February 2025 for Als with established RMB trade finance governance and controls. Quotas in Phase 1 will be allocated based on existing RMB trade finance activities, controls, and projected business pipelines. Als not ready for Phase 1 may join later phases after enhancing their systems. A second phase is planned for mid-2025 to include more Als and adjust quotas based on Phase 1 experience.
Operational Details
Participating Als may tap the facility on a deal-by-deal basis (RMB500 million+ per transaction) or portfolio basis. Als must match funding size/duration to trade finance provided and avoid excess tapping. The HKMA will monitor usage and may impose additional documentation, quota reductions, or remedial actions for unreasonable excesses. Retrospective reporting on usage will be required upon HKMA request, including customer details and explanations for funding-trade finance mismatches.
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