Asian central banks launch securities lending platform

A GROUP of Asian central banks have agreed to lend local currency bonds through a regional securities market, with the goal of improving crossborder bonds trade and boosting money supply.

In a statement, members of the Executives’ Meeting of East Asia- Pacific Central Banks ( EMEAP) announced the creation of a platform for securities lending.

Selected local currencydenominated papers held under the regional Pan-Asia Bond Index Fund (PAIF) will be open for lending through the regional securities market starting July 10.

The PAIF is a component of the Asian Bond Fund, which invests in government and quasigovernment bonds among EMEAP member- economies. The goal is to develop bond markets across the region following the 1997 Asian financial crisis.

The Bangko Sentral ng Pilipinas is part of the EMEAP, alongside the central banks and monetary authorities from Australia, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, New Zealand, Singapore and Thailand.

“The EMEAP believes that PAIF Securities Lending will improve the liquidity of local currency- denominated bonds in the secondary markets, consistent with the EMEAP’s common goal to broaden and deepen bond markets in the region,” the group said in a joint statement issued late Tuesday.

“The EMEAP also believes that PAIF Securities Lending will help to enhance the functioning of regional money markets.”

The securities lending platform allows a financial firm to borrow local currency- denominated bonds from PAIF by posting eligible collateral. In turn, PAIF “retains the right to recall the loaned bond at any time.”

This effectively allows borrowers to secure cash which are expressed in their own currency, which is a new avenue they can turn to when in need of a fresh supply of cash. To add, this also enhances price discovery in the secondary market.

The EMEAP said the Asian bond market has grown by nearly eightfold since 2003 to surpass the $ 10- trillion mark.

National governments and private companies float debt papers as part of their fundraising activities. —