Hong Kong Monetary Authority (HKMA), the central bank of the city, has updated its funding framework to assist banks in the event of a liquidity crisis.

The regulator has unveiled four ways through which banks can borrow money from the HKMA in case of a crunch. These include settlement facilities, standby liquidity facilities, contingent term facility, and resolution facility.

Through settlement facilities, banks can secure overnight liquidity. Using standby liquidity facilities, banks can get liquidity for up to one month.

Contingent term facility can be used in cases where a bank suffers “extraordinary liquidity stress” and is unable to sort out the issue through market funding or other means.

It will also be offered in those circumstances where the regulator feels that the bank’s problems could affect the systemic stability of the city as a whole.

Resolution facility can be availed when HKMA assumes control of a troubled bank. The resolution facility can last until the bank is able to regain market funding.

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HKMA CEO Norman Chan said: “The updated Liquidity Facilities Framework makes operational an important part of the resolution regime in Hong Kong and takes forward a key recommendation of the Financial Stability Board’s 2018 Peer Review of Hong Kong.

“The framework outlines the facilities that are already in place, as well as the newly introduced Resolution Facility, in a systematic way so as to foster a better understanding of the different ways that liquidity may be made available to banks by the HKMA. This is part of our ongoing work to maintain the integrity and stability of the monetary and financial systems of Hong Kong.”