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The source disclosed that foreign banks may apply for short-term loans from the central bank by offering eligible pledges such as treasury bonds, central bank bills, financial bonds and foreign exchange deposits. And the central bank will offer short-term loans via bidding, mainly loans in RMB yuan.
The mechanism applies to foreign corporate banks only, and does not apply to branches of foreign bank in China.
As the financial crisis deepens in the US since mid-September, Chinese banks have contracted their lending to foreign banks on the inter-bank market, putting foreign banks under great pressure of capital fluidity.
Therefore, foreign banks resort to PBoC for help. PBoC holds that the fluidity difficulties foreign banks in China face at present are not a result of operation, but the influences of the financial crisis in the US. It is ready to offer the help.
Central bank statistics show that foreign financial institutions financed 344.6 billion yuan from the inter-bank market in the first half of 2008, accounting for 14 percent of the market?s total.
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