The Swiss National Bank (SNB) and the People’s Bank of China (PBOC) have entered into a bilateral currency swap agreement.
The move will bolster access to trade finance in the Swiss franc and strengthen the international use of the renminbi (Rmb).
The agreement, signed this week in Beijing, allows the two central banks to purchase and repurchase as much as Rmb150bn (US$24bn) over the next three years, the Zurich-based central bank said in a statement. This will allow liquidity in Rmb and Swiss francs to be made available to the relevant markets as required.
The PBOC has also granted the SNB an investment quota of Rmb15bn for the Chinese interbank bond market.
“The swap agreement is a key prerequisite for the development of an Rmb market in Switzerland,” the Swiss central bank stated, adding that the quota for the Chinese interbank bond market will allow the SNB’s foreign-currency reserves to “be diversified even further.”