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RMB Pledge-Style Repo


 

Introduction

RMB bond pledge-style repo business means a short-term RMB financing transaction with bonds as pledge of rights, and trading amount is calculated by certain discount rate of the pledged bonds. It means a financing activity where the repo party pledges the bonds to the reverse repo party, and at the same time the two parties agree that the repo party will return to the reverse repo party amount of funds at the appointed repo interest rate, and reverse repo party will return the pledged bonds to the repo party at date appointed by the two parties in future. In bond repurchase, the party that borrows funds and pledges bonds is called the repo party, and the party that lends and holds the pledge right of bonds is called the reverse repo party.

Features

1. Enhance mobility of customers' assets;

2. Effectively reduce financing costs of customers.

Target Customers

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

2. Those who have opened bond accounts with China Government Securities Depository Trust & Clearing Co. Ltd.(CDC);

3. Those with short-term financing demand.

Term

The term can be set anywhere between 1 day and 365 days, and during repo period the transaction contract is not allowed to be terminated before its expiry.

Process

I. Self-support Pledged Repo

A. Self-support Pledged Reverse Repo

1. Requests for pledge-style repo transaction by customers and negotiations of amount, interest rate, term and other elements of the repo;

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

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

4. Transfer of funds after successful transfer of bonds pledge;

5. The clearing institution collects payable principal and interest and lifts pledge of bonds.

B. Self-support Pledge-style Repo

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

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

3. Bond pledge settlement by the clearing institution according to foreground transaction;

4. Check and acceptation of repo funds by the clearing institution after bonds successfully pledged;

5. The clearing institution returns payable principal and interest and urges the counterparty to lift pledge of bonds.

II. Agency Pledge Repo

A. Agency Pledge Reverse Repo

1. Class-B customers

(1) Negotiation of the amount, interest rate, term and other elements of repo according to quotations between Bank of China and customers;

(2) Repo transaction conducted through national domestic currency inter-bank market trading system;

(3) Bond pledge settlement conducted according to foreground transaction;

(4) Bank of China collects payable principal and interest of repo and lifts pledge of bonds on the maturity date.

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

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

(2) Negotiation of the amount, interest rate, term and other elements of repo by Bank of China with customers according to quotations;

(3) Completion of transaction through  filling out repo transaction contract or Reuters Settlement and Agency System and Trading Center (Shanghai);

(4) Bond settlement procedures of Bank of China for the customers according to repo contract.

(5) Contract signed and sealed by the customers is sealed by Trading Center (Shanghai) after sent by fax;

(6) The Trading Center (Shanghai) sends repo contract with notes of agency branches and agency handling fees to the branches by fax;

(7) Transfer of funds;

(8) Bank of China reclaims principal and interest of repo and lifts pledge of the bonds on the maturity date.

B. Pledge Repo by Agency

1. Class-B customers

(1)  Negotiations of the amount, interest rate, term and other elements of repo between Bank of China and  customers according to quotations;

(2)  Repo transaction conducted through national domestic currency inter-bank market trading system;

(3)  Bond pledge settlement conducted according to foreground transaction;

(4)  Bank of China returns payable principal and interest and urges the counterparty to lift pledge of bonds on the maturity date.

2. 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, term and other elements of repo between Bank of China and  customers according to quotations;

(3) Completion of transaction through filling out repo transaction contract or Reuters Settlement and Agency System and Trading Center (Shanghai);

(4) Settlement procedures of pledge bonds for the customers according to repo contract;

(5) Bond settlement procedures for the customers according to repo contract;

(6) Bank of China returns payable principal and interest and on behalf of the counterparty lifts pledge of bonds on the maturity date.

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