China's central bank has established a bond-market swap facility to help eligible financial institutions manage large investor withdrawals when liquidity stress at asset managers coincides with systemic pressure in the bond market.
The People's Bank of China (PBOC) named the measure the Bond Market NBFI Swap Facility (BNSF) in an Oct. 26 notice. The facility is intended for episodes of collective liquidity risk among asset managers and systemic pressure in the bond market.
Under the arrangement, the PBOC would lend central bank bills to qualified firms. They could use repurchase agreements, or repos, to raise cash against the bills. The proceeds could fund purchases of eligible bonds or product units from the firms' own publicly offered products, or those of their asset management subsidiaries, when those products face redemptions.
Eligible participants include bank wealth-management subsidiaries with systemic influence and managers of publicly offered funds, along with their parent banks or securities firms. Firms using the facility must pledge the assets they purchase to the PBOC and continue to meet financial-market prudential requirements.
PBOC Gov. Pan Gongsheng described the risk behind the measure at the 2026 Financial Street Forum in Beijing on Oct. 19. He said withdrawals could prompt bond sales that fuel further redemptions. Pan outlined the earlier proposal for a nonbank redemption backstop and said the PBOC would develop it with the China Securities Regulatory Commission (CSRC) and the National Financial Regulatory Administration (NFRA).
The Oct. 26 notice names the facility and sets out how eligible firms could obtain funding and which assets they must pledge.
