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BEIJING (MNI) - The People's Bank of China issued a document Friday
enabling depository financial institutions, mainly banks, to use local
government bonds as collateral when their clearing account is short of money.
When banks do not have enough funding in their clearing account, they can
automatically use eligible bonds, including China government nd policy bank
bonds as collateral to borrow money from the PBOC to smooth clearing
transactions. Now, local government bonds and other bonds that the PBOC deems
eligible can also be used as a collateral for these transactions.
"The measure should be seen as facilitating clearing and not as a liquidity
tool," the PBOC said on its official website Friday. "Most funding used this way
can be settled by the end of the day, so the new document will not have an
impact on base money and liquidity management."
The new rule also raised the borrowing quota in clearing account for banks.
Policy banks, state-owned banks and postal saving banks saw their quotas rise
from 2% of paid-in capital to 4%; national joint-stock banks and small- to
medium-sized banks, including city commercial banks, saw their quotas rise from
2% and 5% of their paid-in capital to 10% and 15%, respectively.
The interest rate for this borrowing is the overnight Standing Lending
Facility (SLF) rate.
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