Featured Product

    BIS Announces RMB Liquidity Arrangement, Issues Publications on CBDCs

    June 25, 2022

    The Bank for International Settlements (BIS) announced a Renminbi (RMB) Liquidity Arrangement, which has been developed with the People's Bank of China (PBC), to provide liquidity to central banks through a new reserve pooling scheme. In addition, the BIS Innovation Hub set out lessons learned from the practical experiments on the cross-border use of the central bank digital currencies (CBDCs). BIS also published its Annual Economic Report for 2022, which includes a special chapter that sets out the blueprint for a future digital monetary system and examines the structural limitations of crypto-assets and decentralized finance.

    RMB liquidity arrangement. This liquidity arrangement aims to provide liquidity support and can be utilized by participating central banks during future periods of market volatility. Each participating central bank contributes a minimum of RMB 15 billion or USD equivalent, in RMB or USD, placed with the BIS, creating a reserve pool. The arrangement initially includes a group of central banks in Asia and the Pacific, including Bank Indonesia, Central Bank of Malaysia, the Hong Kong Monetary Authority, the Monetary Authority of Singapore, the Central Bank of Chile, and PBC. The reserve pooling provides additional features, as participating central banks would not only be able to draw down on their contributions, but would also gain access to additional funding through a collateralized liquidity window operated by BIS, up to an amount equivalent to the central bank's share of the collateralized liquidity window.

    Lessons learned on CBDCs. The BIS Innovation Hub is leading practical experiments on the CBDCs, wherein three cross-border CBDC projects have been completed with central banks and private-sector partners worldwide (Inthanon-LionRock2, Jura, and Dunbar), one project is in progress (mBridge), and yet more projects are being planned. This latest BIS publication outlines the similarities and differences of the four projects, with a view to setting out the insights and lessons learned. Collectively, the projects show that platforms with two or more CBDCs are technically feasible and offer a range of benefits that can lead to faster, cheaper, and more transparent payments across borders. However, certain concerns that remain to be tackled relate to policy considerations, legal and regulatory frameworks, and basic operational economics that might call into question the viability of multi-CBDC platforms. Hence, many avenues still remain to be explored by both the public and private sectors, individually and in collaboration. The publication notes that collaborative efforts are necessary to answer the questions ahead and that the BIS Innovation Hub is uniquely positioned to bring central banks together to explore how cross-border payments can be improved.

    Annual Economic Report for 2022. The report contains a chapter that examines the structural limitations of crypto and decentralized finance (DeFi), outlining the inherent risks in their design. The chapter highlights that a digital version of money issued by a central bank could provide many of the same features offered by cryptocurrencies and stablecoins. The chapter includes a summary of the structural limitations that prevent blockchains from processing a high volume of transactions per second, like other public and private payment systems and provides an outline of the best regulatory approaches to crypto and decentralized finance risks. It also features a discussion on how permissioned distributed ledger technology systems can use central bank money, along with the insights on how to design retail CBDCs that support financial inclusion. The chapter notes that recent advances in wholesale and retail CBDCs and retail fast payment systems could form the basis of an adaptable future monetary system that fosters private-sector innovation, while enabling greater financial inclusion and user control over data. It is highlighted that the future monetary system should be the fusion of new capabilities around the core of trust provided by the central bank. The private sector will provide customer-facing activities with new functions such as the tokenization of money and financial instruments and instant retail payments through new interfaces. This combination could bring about lower costs, greater financial inclusion, more user control over financial data, improved integrity, and seamless cross-border activity, helping to overcome shortcomings in today's arrangements.

     

    Related Links

     

    Keywords: International, Asia Pacific, China, Banking, Liquidity Risk, RMB Liquidity Arrangement, CBDC, Digital Currencies, Suptech, Basel, Regtech, Decentralized Finance, BIS Innovation Hub, BIS

    Featured Experts
    Related Articles
    News

    ESAs Issue Multiple Regulatory Updates for Financial Sector Entities

    The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.

    November 15, 2022 WebPage Regulatory News
    News

    ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments

    The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.

    November 10, 2022 WebPage Regulatory News
    News

    IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets

    The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.

    November 09, 2022 WebPage Regulatory News
    News

    EBA Finalizes Methodology for Stress Tests, Issues Other Updates

    The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups

    November 09, 2022 WebPage Regulatory News
    News

    OSFI Sets Out Work Priorities and Reporting Updates for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.

    November 07, 2022 WebPage Regulatory News
    News

    APRA Finalizes Changes to Capital Framework, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.

    November 03, 2022 WebPage Regulatory News
    News

    BIS Hub and Central Banks Conduct CBDC and DeFI Pilots

    The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.

    November 03, 2022 WebPage Regulatory News
    News

    ECB Sets Deadline for Banks to Meet Its Climate Risk Expectations

    The European Central Bank (ECB) published the results of its thematic review, which shows that banks are still far from adequately managing climate and environmental risks.

    November 02, 2022 WebPage Regulatory News
    News

    ESAs, ECB, & EC Issue Multiple Regulatory Updates for Financial Sector

    Among its recent publications, the European Banking Authority (EBA) published the final standards and guidelines on interest rate risk arising from non-trading book activities (IRRBB)

    October 31, 2022 WebPage Regulatory News
    News

    EC Adopts Final Rules Under CRR, BRRD, and Crowdfunding Regulation

    The European Commission (EC) recently adopted regulations with respect to the calculation of own funds requirements for market risk, the prudential treatment of global systemically important institutions (G-SIIs)

    October 26, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8582