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RMB Outright Repo


 

Introduction

RMB bond outright repo means a transaction where the holder (repo party) sells bonds to the purchaser (reverse repo party), and at the same time the two parties agree that on a future date the repo party will purchase back the same number of bonds of the kind at the agreed price from the reverse repo party.

Features

1. Enhance mobility of customers' assets;

2. Effectively reduce financing costs of customers;

3. Increase convenience of bond lending for customers.

Term

The term can be set anywhere between 1 day and 91 days, and during the repo period transaction contract is not allowed to be terminated before its expiry.

Interest Rate

Generally, repo interest rates for lending funds and lending bonds by Bank of China shall be adjusted in consideration of the market interest rate.

Charges

1. Transaction costs of National Inter-bank Funding Center: Transaction handling fees is charged at 2.5/million of transaction amount;

2. Settlement fee charged by China Government Securities Depository Trust & Clearing Co., Ltd.(CDC): repo handling fees of RMB 150/deal;

3. Agency and settlement commission fee charged to Class-C customers. Not higher than one ten thousandth of the face value of the bond.

Target Customers

1. Financial institutions or other enterprises and institutions with independent legal person status;

2. Those have opened bond accounts with CDC;

3. Those with demand for short-term funds or bonds financing.

Process

I. Self-support Outright Reverse Repo

1. Request for outright repo transaction, and negotiations of amount, interest rate, term and other elements of the repo by customers;

2. Reverse repo transaction conducted by national domestic currency inter-bank trading system;

3. Bond settlement and transfer by  clearing institutions according to foreground transaction;

4. Transfer of funds after successful transfer of bond;

5. Collection of payable principal and interest of repo with settlement and transfer of bonds on their expiry by Bank of China.

II.  Self-support Outright Repo

1. Negotiations of the amount, interest rate, term and other elements of the repo between Bank of China and the counterparty;

2. Repo transaction conducted by national domestic currency inter-bank trading system;

3. Bond pledge settlement and transfer by clearing institutions according to foreground transaction;

4. Check and acceptation of repo funds after successful transfer of bonds;

5. Bank of China collects payable principal and interest and urges the counterparty to conduct settlement and transfer of bonds on their expiry.

III. Outright Reverse Repo by Agency

A. Class-B customers

1. Negotiations of the amount, interest rate, term and net price of the first day's bond transaction and other elements of repo between Bank of China and the customers;

2. Repo transaction conducted through national domestic currency inter-bank trading system;

3. Bond settlement and transfer by clearing institution according to foreground transaction;

4. On date of expiry, the bank collects payable principal and interest and conducts settlement of repo and transfer of bonds.

B. Class-C customers (including non-financial institutions)

1. Customers open class-C bond settlement accounts with CDC through Bank of China;

2. Negotiations of the amount, net price of the first day's bond transaction and other elements of repo between Bank of China and the customers;

3. Transaction completion through filling out bond transaction contracts twice or Reuters Settlement and Agency System and Trading Center (Shanghai);

4. Bond transfer and settlement of Bank of China according to the first bond transaction contract;

5. Principal and interest recalled by Bank of China on maturity date;

6. Bond transfer and settlement for the customers by Bank of China according to the first issue of bond transaction contract;

7.  Transfer of the bond by Bank of China according to due bond transaction contract.

IV. Agency for Outright Repo

A. Class-B customers.

1. Negotiations of the amount, interest rate, net price of the first day's bond transaction and other elements of repo between Bank of China and the customers;

2. Repo transaction conducted by national domestic currency inter-bank trading system;

3. Bond pledge settlement and transfer by Bank of China according to foreground transaction;

4. Bond settlement and transfer after the accepted funds have been received;

5. On maturity date, Bank of China shall urge the counterparty to repay principal and interest of repo after transfer of bond.

B. Class-C customers (including non-financial institutions)

1. Customers open class-C bond settlement accounts with CDC through Bank of China;

2. Negotiations of the amount, interest rate, net price of the first day's bond transaction and other elements of repo between Bank of China and the customers;

3. Transaction completion through filling out bond transaction contracts or Reuters Settlement and Agency System and Trading Center (Shanghai);

4. Check and acceptation of funds received by Bank of China according to the first issue of bond transaction contract;

5. The Trading Center (Shanghai) sends both the first and the last bond transaction contracts with notes of agency branches and handling fees to the branches by fax;

6. Bond transfer and settlement of Bank of China and the customers the bank serves as an agent;

7. On maturity date, Bank of China shall repay principal and interest of repo after transfer of bond for the counterparty according to the last bond transaction contract.

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