Funding of up to 25 billion yuan (S$5.11 billion) for banks in Singapore was announced in a new initiative by the Monetary Authority of Singapore (MAS) yesterday.
The scheme enhances yuan liquidity and supports banks' abilities to meet their customers' growing business needs in renminbi (RMB) for Singapore and the region, said MAS in a statement.
Yuan funding of up to three months will be channelled to primary dealers - banks in Singapore approved by the MAS - through the authority's money market operations.
These funds will strengthen their credit intermediation capabilities and the overall yuan market liquidity in Singapore.
To support the development of the offshore yuan market in Singapore, the authority previously established the MAS Overnight RMB Liquidity Facility along with the MAS RMB Facility.
Banks could access these backstop facilities to obtain overnight and term RMB liquidity, respectively, when needed to facilitate settlement needs and financing of cross-border trade or investment.
Following the introduction of the new initiative, the MAS Overnight RMB Liquidity Facility, which had a size of five billion yuan, was discontinued yesterday.
The MAS RMB Facility remains in operation.
Market participants indicated that longer tenors and the larger amount of yuan funding by the new initiative were better than the MAS Overnight RMB Liquidity Facility, said MAS.