China’s Interbank Market Opens Up to Qualified Members to Apply for Lending Facilities

China's Interbank Market Opens Up to Qualified Members to Apply for Lending FacilitiesMembers who are qualified for China’s interbank market are eligible to apply for lending facilities of the central bank as of yesterday. The market operator a unit of the People’s Bank of China announced that standing lending facilities are now available by application to all qualified members of the interbank market. Standing lending facilities loans was first used by the People’s Bank of China are collateralized credit facilities that have a maximum term of three months.

Although the announcement did not give any specific detailed standards institutions that would need to met in order to qualify for access to loans. A SLF loan, which has been primarily granted to State policy banks, or nationwide commercial banks. In opening the process to smaller banks could potentially help in smoothing out equity or money market volatility if capital outflows intensify and continues to affect the liquidity of the yuan. the central bank will then deploy lending instruments such as standing lending facility and medium term lending facility in order to supplement the standard open market operations.

Before such facilities were opened to Chinese banks that were selected on a case to case basis by the central bank. Interbank lending market where key short term rates are being set and the majority of fixed income trade takes place are composed of banks which include brokerages, insurers and other financial institutions. During the weeks of after the devaluation of the yuan in August, the central bank made heavy use of these lending facilities to offset capital outflows and State bank foreign exchange interventions in order to support the currency.

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