QUALIFIED members of China’s interbank market are eligible to apply for central bank lending facilities starting yesterday, the market operator, a unit of the People’s Bank of China, announced on its website.

    Standing lending facilities (SLF) will now be available by application to all qualified members of the interbank market.

    SLF loans, first used by the People’s Bank of China in 2013, are collateralized credit facilities with a maximum term of three months.

    The announcement did not specify detailed standards institutions would need to meet to qualify for access to the loans. SLF loans have been primarily granted to State policy banks or big nationwide commercial banks.

    Opening the process to smaller banks or brokerages could potentially help smooth equity or money market volatility if capital outflows intensify and continue to affect yuan liquidity.

    China’s central bank deploys lending instruments such as the standing lending facility and medium-term lending facility to supplement the standard open market operations it conducts every Tuesday and Thursday.

    Previously, such facilities were only open to Chinese banks selected on a case-by-case basis by the central bank.

    China’s interbank lending market, where key short term rates are set and the majority of fixed-income trade takes place, is composed primarily of banks but includes brokerages, insurers, and other financial institutions.

    In the weeks following the surprise devaluation of the yuan in mid-August, the central bank has made heavy use of its lending facilities to offset capital outflows as well as State bank foreign exchange interventions to support the currency.

    (SD-Agencies)