PBoC Creates BNSF Facility to Support Non-Bank Bond Redemptions; Li Daxiao Says It Helps Prevent Liquidity Crises at Asset Managers

The People's Bank of China has decided to establish a Bond Market Non-Bank Significant Redemption Swap Facility (BNSF).

Under specific scenarios where asset management institutions face group-wide liquidity risks and the bond market comes under systemic pressure, the facility supports systemically important bank wealth management subsidiaries and public fund managers (or their corresponding parent banks, securities parent companies, etc.) in borrowing central bank bills from the People's Bank of China for market repo financing, so as to purchase eligible bonds or product shares of their own public fund products (or those of their asset management subsidiaries) that have suffered redemptions, and to pledge them to the People's Bank of China.

Participating institutions should continuously meet prudential financial market management requirements and maintain market discipline.

In response, former chief economist at a brokerage Li Daxiao said the measure helps prevent liquidity risks at asset management institutions and is conducive to stabilizing non-bank financial institutions, stabilizing the capital market and stabilizing the economy.

He said this is a major move and a major positive, and it also provides positive support for stabilizing non-bank financial institutions and the stock market.