PBOC Issues Swap Connect Draft Proposal

The PBOC has issued a proposal outlining Swap Connect, a new program that will allow offshore investors access to the mainland interest rate swap market via Hong Kong, according to a statement published on the central bank's website. The PBOC said that transactions of interest rate products will be in yuan, and gave some detail on offshore investor participation requirements. The clearing houses managing the program should establish special risk reserve resources and default resolution arrangements. Foreign investors who use foreign exchange to participate in the clearing of Northbound Swap Connect transactions can open a yuan fund account with a Hong Kong clearing bank for fund exchange and settlement business, the PBOC statement said.