HKMA’s augmented RMB liquidity facility will benefit HK subsidiaries of mainland banks the most

Find out which banks these are.

According to Moody's, on 26 July, the Hong Kong Monetary Authority (HKMA) augmented its renminbi (RMB) liquidity facility and will begin providing overnight RMB funds to Hong Kong banks on the day of request. 

The enhancement to HKMA’s RMB liquidity facility is credit positive for Hong Kong banks and will solidify Hong Kong’s leading position as an offshore RMB hub.

Here's more from Moody's:

Before this change, banks were able to borrow seven-day RMB funds from HKMA’s RMB liquidity facility, but had to wait one day after making a request. The availability of same-day funds will address potential unexpected funding shortages, such as when customers and counterparties fail to make payments as scheduled. The measure will increase market participants’ confidence in banks’ RMB funding positions.

Mainland corporates with foreign and Hong Kong operations are major borrowers of offshore RMB funds, whose costs are lower in Hong Kong than on the mainland.

Hong Kong subsidiaries of mainland banks will benefit the most. These banks include Bank of China (Hong Kong) Limited, China Construction Bank (Asia) Corp Limited, China CITIC Bank International Limited, Industrial & Comm’l Bank of China (Asia) Limited and Wing Lung Bank Limited. 

They can leverage their parents’ longstanding customer relationships to extend offshore RMB funds to mainland corporates and are better positioned to grow in this market segment than their peers.

Hong Kong has the largest pool of offshore RMB deposits and the highest concentration of offshore RMB loan borrowers. The enhancement of the RMB facility will entrench Hong Kong’s leading position as an offshore RMB hub.

However, further growth in the banking system’s RMB loans and exposures to mainland corporates will also increase its susceptibility to adverse economic developments in mainland China.