The China Foreign Exchange Trade Center has launched a currency lending business with bonds as collateral, enabling domestic commercial banks to pledge their foreign currency bonds to borrow from overseas counterparts, Yicai.com reported.
On the first trading day, nine banks including the China Development Bank, Bank of China, China Construction Bank, China Merchants Bank and Shanghai Pudong Development Bank have pledged their Treasury bonds, dollar bonds issued by Chinese enterprises overseas and other types of bonds to borrow US dollars.
The trading volume for the first day was about US$156 million, according to the report.
At present, most commercial banks have bilaterally signed the Global Master Repurchase Agreement, to borrow from their foreign counterparts by pledging their overseas bonds.
However, the agreement can only support lending outside the border. Thus, it has been difficult for banks to fulfill the financing demands of foreign currency positions inside the country.
With this new foreign currency lending business in the CFETC, domestic commercial banks can now build up their foreign currency reserve domestically.