Hong Kong regulator unveils list of CNH Primary Liquidity Providers

Maria Nikolova

The HKMA has designated nine institutions as Primary Liquidity Providers for offshore renminbi market in Hong Kong.

The Hong Kong Monetary Authority (HKMA) announces today that it has designated nine authorized institutions as Primary Liquidity Providers (PLPs) for offshore renminbi (RMB) market in Hong Kong (i.e. CNH market) for another term of two years, with effect from October 27 2018. This follows the expiry of their current 2-year term of designation.

The list includes the following institutions:

  • Agricultural Bank of China Limited;
  • Bank of China (Hong Kong) Limited;
  • Bank of Communications Co., Ltd;
  • BNP Paribas;
  • China Construction Bank (Asia) Corporation Limited;
  • Citibank, N.A.;
  • Hongkong and Shanghai Banking Corporation Limited;
  • The Industrial and Commercial Bank of China (Asia) Limited;
  • Standard Chartered Bank (Hong Kong) Limited.

The HKMA explains that it has reviewed the performance of these nine PLPs in the past two years, and considers that they are all active participants in the CNH market, and have been effectively providing CNH funding and making market for CNH instruments, as well as using the Hong Kong platform as a global hub for offshore RMB business.

The HKMA will continue to provide each of the PLPs with a dedicated RMB repo facility of RMB2 billion, in order to facilitate their liquidity management when they carry out market-making activities and provide liquidity in the CNH market. The HKMA will also continue to regularly review the experience in operating the scheme.

The Hong Kong financial services landscape is developing swiftly, with a new business model of virtual banking being in the works. In May, the HKMA issued revised guidelines for the authorisation of virtual banks. The HKMA aims to start granting licences to virtual banks by the first quarter of next year. Chinese financial technology company 9F Group is reported to be among those seeking a virtual banking license in Hong Kong. In June this year, Standard Chartered Bank (Hong Kong) Limited unveiled its plans to apply for a virtual banking license in Hong Kong.

The concept of “virtual banks” is becoming more popular in Hong Kong, according to a recent survey, which was conducted during the second half of June 2018 and covered 811 local SMEs. The study shows that whereas 46% of surveyed SMEs have heard about “Virtual Bank”, 23% are reluctant to adopt virtual banking service. For those interested in using the service, “Cybersecurity” (77%) and “System stability” (61%) are the key factors in service selection.

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