East Asia central banks launch securities lending

MANILA, Philippines — Central banks in East Asia and the Pacific including the Bangko Sentral ng Pilipinas (BSP) launched a securities lending facility to promote efficient financial intermediation in the region.

The Executives’ Meeting of East Asia-Pacific Central Banks (EMEAP) has announced the launch of securities lending in the Asian Bond Fund (ABF) Pan-Asia Bond Index Fund (PAIF).

Starting July 10, selected local currency-denominated bonds held within PAIF would be made available for lending in the regional securities lending markets.

BSP Governor Nestor Espenilla Jr. said members of the East Asia-Pacific Central Banks (EMEAP) believe the PAIF securities lending would improve the liquidity of local currency-denominated bonds in the secondary markets, consistent with the group’s common goal to broaden and deepen bond markets in the region.

“A better-developed securities lending market in the region, including the Philippines, will help enhance the price-discovery mechanism and advance institutional and settlement infrastructures,” Espenilla said.

He said the members of EMEAP continue to cooperate on various regional initiatives to develop the regional bond markets.

The BSP chief said EMEAP would collaborate with the relevant authorities and market participants to ensure the success of PAIF securities lending in both improving the liquidity and enhancing the functioning of regional bond markets.

The ABF has played a vital role in improving market infrastructure, accelerating tax and regulatory reform to facilitate cross-border investments, and raising investor awareness and interest in Asian bonds.

Since the inception of ABF in 2003, the size of Asian local currency-denominated bond markets has grown almost eight-fold to exceed $10 trillion, providing more funding and investment instruments in local currencies.

The EMEAP also believes that PAIF Securities Lending would help enhance the functioning of regional money markets.

The EMEAP remains committed and unified to lead the ABF Initiative.