- Our Ref:
- B1/15C
13 April 2004
The Chief Executive
All Licensed Banks
Dear Sir / Madam,
Liquidity Return -
Personal Renminbi (RMB) Business in Hong Kong
Further to the letter dated 5 February 2004 regarding the
Personal RMB Business conducted by licensed banks in Hong Kong, and
to the Hong Kong Association of Banks having raised this issue with
us, I am writing to clarify the reporting requirement for
Participating Banks ("PBs") in respect of their RMB deposits with
the Clearing Bank ("CB") for the purpose of liquidity ratio
calculation.
Pursuant to the Fourth Schedule to the Banking Ordinance, a
liquefiable asset of an authorized institution must at least meet
the following requirements:
- not overdue;
- free from encumbrances;
- freely remittable and payable to the authorized institution
concerned; and
- denominated in Hong Kong dollars or in a currency freely
convertible into Hong Kong dollars.
According to the People's Bank of China Announcement No.16 of
2003, the CB was authorised, as a member of the China Foreign
Exchange Trade System, to arrange to square its RMB open position
arising from the exchange of RMB into Hong Kong dollars, and vice
versa. Moreover, the CB can provide services for the PBs to square
their RMB open positions that result from the exchange of RMB under
the personal RMB business in Hong Kong.
Under these arrangements, the PBs' RMB deposits at the CB that
result from the personal RMB business in Hong Kong are regarded as
freely convertible, remittable and payable to the PBs. It can be
confirmed, therefore that the deposits are eligible for inclusion
as liquefiable assets of the PB concerned in the calculation of
liquidity ratio.
However, the amount of RMB liquefiable assets reported will be
limited to 25% of the RMB liabilities included as qualifying
liabilities. This is to avoid distortion of the overall liquidity
ratios of the PBs, given that any extra RMB liquidity maintained by
the PBs with the CB will only be convertible to meet the needs of
the PBs arising from the personal RMB business.
For reporting in the Return of Liquidity Position (MA(BS)1E),
the RMB deposits with the CB eligible for liquefiable assets should
be reported under Part I.1.(3)(a) "Total one-month liabilities of
relevant banks to the authorised institutions" while the RMB
liabilities with the customers should be reported under Part
I.1.(11) "Other one-month liabilities".
Should you have any questions on the above, please contact Ms
Aloysia Wong on 2878 8743 or Ms Sophia Lam on 28781623.
Yours faithfully,
Simon Topping
Executive Director (Banking Policy)
