The Hong Kong Dollar Is Pegged to the RMB and HKMA Participates in the RMB Liquidity Arrangement

On June 25, Bank for International Settlements (BIS) announced that the Hong Kong Monetary Authority (HKMA) was one of the first central banks to participate in the Renminbi (RMB) liquidity arrangements.

According to Sohu.com, the BIS recently announced that it has signed the Renminbi Liquidity Arrangement (RMBLA) agreement with the People’s Bank of China, and the HKMA is one of the first participants in the agreement. In this regard, the HKMA said that during periods of market volatility, the ability to provide RMB support to other participating central banks will help stabilize finance. It is reported that with the exception of the HKMA, the first batch of participating central banks are the Central Bank of Indonesia, the Central Bank of Malaysia, the Monetary Authority of Singapore and the Central Bank of Chile.

According to the RMB liquidity arrangement agreement, each of the above-mentioned participating central banks must invest no less than 15 billion RMB or the equivalent in USD to build a reserve fund pool, and when there is a demand for liquidity, in addition to withdrawing its capital contribution, participants can also borrow funds from the reserve pool with collateral.

It can be seen that HKMA formally links the Hong Kong dollar to the RMB through this agreement.