Norman T L Chan: Hong Kong - an offshore renminbi business centre
Speeking points by Mr Norman T L Chan, Chief Executive of the Hong Kong Monetary
Authority, on the Regulatory Requirements for the Adjustments to Renminbi Risk
Management Limit and Net Open Position, Hong Kong, 17 January 2012.
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The development of Hong Kong as an offshore RMB business centre achieved encouraging
results in the past year. Trade settlement using RMB reached RMB2 trillion; RMB deposits
almost doubled; and total issuance of dim sum bonds exceeded RMB100 billion. I am very
confident that the trend of solid development will continue in 2012.
With the continued growth in both turnover and depth of the offshore RMB (CNH) market in
Hong Kong, the Hong Kong Monetary Authority (HKMA) considers that conditions are now
ripe to appropriately relax certain regulatory requirements on the RMB business of banks in
Hong Kong.
First, on the regulatory requirements of the RMB net open position, the HKMA has decided to
raise the limit for RMB net open position, from not exceeding 10% to not exceeding 20% of
the bank's total RMB assets or liabilities.
Second, currently the HKMA requires each Participating AI to maintain the sum of RMB cash
or balances with the RMB Clearing Bank and the People's Bank of China, Shenzhen branch,
at no less than 25% of its total RMB customer deposits (referred as RMB risk management
limit). The HKMA has now decided that Participating AIs can include two more types of RMB
assets, namely "RMB sovereign bonds issued in Hong Kong by the Ministry of Finance of
China" and "RMB bond investment through the Mainland interbank bond market", in the
calculation of this limit.
The above two relaxations take effect today. I believe they will help expand the scope of
development for offshore RMB business in Hong Kong and provide banks with a greater
flexibility in RMB asset management, which will be conducive to further development of the
market.
Third, the HKMA has imposed some restrictive arrangements on the inclusion of RMB assets
as liquid assets in calculating the statutory liquidity ratio of AIs. As the offshore RMB market
in Hong Kong becomes more mature, I believe there is room for suitably relaxing these
restrictions. Since the adjustments to be made in the calculation are more complicated and
technical, we shall announce the details later.