China's central bank launches swap facility to bolster capital market

China's central bank on Friday launched the Securities, Funds and Insurance companies Swap Facility (SFISF), with the first batch of application quota exceeding 200 billion yuan (about 28.1 billion U.S. dollars).

The People's Bank of China announced the decision to set up the SFISF in a statement last week, as part of efforts to support the healthy and stable development of the capital market.

The tool will allow eligible securities, funds and insurance companies to use their assets including bonds, stock ETFs and holdings in constituents of the CSI 300 Index as collateral in exchange for highly liquid assets such as treasury bonds and central bank bills, according to the central bank.

So far, a total of 20 securities and funds companies have been approved to participate in the SFISF operation.

The central bank on Friday also launched a special re-lending facility to guide banks to provide loans to listed companies and their major shareholders for buybacks and increasing shareholdings.

The initial re-lending scale is 300 billion yuan at an interest rate of 1.75 percent. The facility can be applied to various types of companies regardless of their ownership, according to the central bank.