Hong Kong: Hong Kong banks will be able to make better use of their yuan assets according to the Hong Kong Monetary Authority, Fitch Ratings said on Monday.
The agency said that the new regulation will allow lenders to use more of their yuan assets for direct lending and investing in yuan non-government securities issued offshore.
“Banks' profitability should benefit from the announced switch from a risk management limit to a liquidity ratio under which at least 25% of renminbi liabilities falling due within one month need to be covered by liquefiable renminbi assets,” Fitch said.
Fitch also praised the authority’s newly introduced one-week offshore yuan liquidity facility as a useful backstop for Hong Kong banks.
With the mainland’s effort to build Hong Kong as an offshore yuan centre, the city has seen yuan deposits and certificates of deposit rise ten-fold in the past two years, while 2011 yuan bond issuance in Hong Kong was RMB100bn compared with less than RMB40bn in 2010. [19/06/12]