【中央结算公司_ICMA】2024推动人民币债券担保品参与全球回购交易白皮书_90页_37mb

Summary of the White Paper: Use of RMB-denominated Bonds as Collateral for Global Repo Transactions

Core Content

This white paper, co-authored by the China Central Depository & Clearing Co., Ltd. (CCDC) and the International Capital Market Association (ICMA), explores the feasibility of using RMB-denominated bonds as collateral in global repo transactions. It aims to provide insights into the structure, regulations, and operational mechanisms of both China's and international repo markets, and to promote the internationalization of RMB bonds as a collateral asset.

Main Points

1. China's Repo Market Overview

• Market Basics:
  China's repo market is divided into the interbank market and the exchange-traded market. The interbank market dominates, with a cumulative transaction volume of RMB1,380.2 trillion in 2022, accounting for about 77% of the total repo market.

• Market Structure and Trading Mechanism:

  • The interbank repo market has over 50,000 participants as of May 2023, with more than 90% being non-bank institutions.
  • The market is dominated by pledged repo, which accounted for over 95% of the interbank bond repo market in 2022.
  • Various trading mechanisms such as X-Repo, pledged repo, and SHCH netting pledged repo have been introduced to optimize processes and enhance efficiency.

• Collateral Composition:

  • (Quasi-)sovereign bonds such as government bonds and policy bank bonds form the majority of collateral in the interbank repo market.
  • The overall coverage ratio of repo transactions remains stable, with pledged repo at 109.62% and outright repo at 113.49% as of May 2023.

• Latest Development:

  • Tri-party repo has gained strong momentum, offering centralized collateral management and risk mitigation.
  • FX repo, using foreign currency bonds as collateral, has seen rapid growth, especially with RMB bonds as collateral.
  • Collateral enforcement mechanisms have been improved, both in practice and through legislative changes such as the Civil Code and the Futures and Derivatives Law.

2. Global Repo Market Overview

• The global repo market includes major segments such as the US and European markets, which rely heavily on the Global Master Repurchase Agreement (GMRA) and have a well-established legal and operational framework.
• The US repo market is characterized by its high volume and the use of title transfer mechanisms, while the European market has developed through the European Repo and Collateral Council (ERCC) and the Global Repo and Collateral Forum (GRCF).

3. Key Trends in the Global Repo Market

• Emerging Technology:
  Fintech is playing an increasing role in the repo market, enhancing transaction efficiency and transparency.
• Sustainability Focus:
  Repo transactions are becoming more aligned with sustainability goals, with the development of sustainability-related repo products and transactions.

4. Basis and Elements for Using RMB Bonds as Collateral in Global Repo Transactions

• Market Opening-up:
  China's bond market has gradually opened, with significant progress in RMB internationalization.
• Internationalization of RMB Bonds:
  RMB bonds are becoming more aligned with international legal systems and are increasingly used in cross-border transactions.
• Core Elements:
  • Agreement Compatibility: Ensuring alignment between domestic and international master repo agreements.
  • Close-out Netting: Implementing this mechanism to enhance legal certainty and reduce risk.
  • Risk Management: Clarifying the outbound fund flow path after enforcement.
  • Interoperability: Building a cross-border custody system to support seamless collateral management.

5. Prospects and Recommendations

• Short-term Preparations:

  • Expanding repo market access and improving enforcement procedures.
  • Enhancing infrastructure to achieve efficient linkages and promote interconnectivity.

• Medium and Long-term Recommendations:

  • Extending the legal certainty of close-out netting and promoting agreement compatibility.
  • Encouraging two-way opening-up of financial markets and the development of multi-level markets.

Key Information

• Collateral Types: (Quasi-)sovereign bonds are the most common collateral in China's repo market.
• Tri-party Repo: Introduced in 2018, it provides centralized collateral management and is gaining traction due to its efficiency and risk mitigation.
• FX Repo: Grew significantly after the introduction of RMB bonds as collateral, reaching RMB4.7 trillion in cumulative volume by May 2023.
• Legal Developments: The Civil Code and Futures and Derivatives Law have improved the legal framework for collateral enforcement, reducing market concerns.
• Collateral Enforcement: While the international market allows direct possession and auction of collateral, China's enforcement process is more judicial and negotiated, which has been improving.

Conclusion

The white paper highlights the growing importance of RMB bonds as a collateral asset in global repo transactions. It emphasizes the need for regulatory and infrastructural improvements, legal harmonization, and the development of cross-border mechanisms to support the integration of China's repo market with the global market. By promoting the use of RMB bonds in international repo transactions, the white paper aims to foster greater market openness and financial integration.