China's central bank sets up non-bank financial institution bond market swap facility

China's central bank said on Monday that it had decided to set up the Bond Market NBFI Swap Facility, or BNSF, to maintain bond market stability.

Under circumstances such as when asset managers face collective liquidity risk or the bond market is under systemic stress, the facility will support certain bank wealth management subsidiaries and public fund managers, as well as their parent firms, in borrowing central bank bills to raise financing.

The institutions can then use the cash to buy eligible bonds or units from their own mutual fund products facing redemptions, then pledge those assets to the central bank.