On October 26, 2026, the Open Market Operations Office of the People's Bank of China issued a notice stating that in order to further implement the requirements of "building a scientific and stable monetary policy system and a comprehensive macro prudential management system" and maintain the stability of the bond market, the People's Bank of China has decided to establish the Bond Market NBFI Swap Facility (BNSF).

At the same time, the above announcement clarifies the usage scenarios and implementation methods of the new monetary policy tools - in specific scenarios where asset management institutions face group liquidity risks and systemic pressures in the bond market, support bank wealth management subsidiaries, public fund managers (or corresponding parent banks, securities parent companies, etc.) with systemic impact to borrow central bank bills from the People's Bank of China for market repurchase financing, in order to purchase eligible bonds or product shares of redeemed public products of the company (or asset management company), and pledge them to the People's Bank of China. Participating institutions should continue to meet the requirements of prudent management in the financial market and maintain market discipline.

On October 19th, Pan Gongsheng, the Governor of the People's Bank of China, stated at the opening ceremony of the 2026 Financial Street Forum that the People's Bank of China will work with the State Administration of Financial Regulation and the China Securities Regulatory Commission to establish liquidity support tools to respond to large redemptions by non bank institutions.

Zhao Yi, an analyst at CITIC Securities, told Economic Observer reporters that the tool may correspond to the "liquidity support tool for responding to large redemptions by non bank institutions" proposed at the Financial Street Forum Annual Meeting on October 19, with only a week between its announcement and implementation. Mechanistically, this tool continues the "bond for bond" arrangement of the October 2024 SFISF (Securities, Funds, Insurance Companies Swap Facility), supporting the shift of the underlying asset from equity assets to bonds, and directly targeting the negative feedback chain of "redemption sell net asset drawdown redemption".

Zhao Yi analyzed that institutions obtain central bank bills, and repurchase financing still needs to be completed through the market. The base currency and the size of the central bank's balance sheet are not affected. By combining qualified collateral with prudent management requirements in the financial market, this tool is positioned closer to emergency relief under the macro prudential framework, rather than regular tool deployment. The implementation of this tool at this time can effectively stabilize market expectations. Looking ahead, detailed rules such as quota, fee rate, and conversion rate are expected to be introduced, which will reshape the liquidity support framework together with the policy interest rate anchor switch (from 7-day reverse repo rate to overnight reverse repo rate) and the expansion of the Standing Lending Facility (SLF). This is an important part of the reform of the monetary policy framework of the People's Bank of China.

Zeng Gang, the director of Tianfu Liyan Financial Research Institute, stated that this tool is not a regular fund allocation arrangement for the market, but a risk buffering mechanism established to cope with extreme scenarios of concentrated redemptions and the cross market risk transmission caused by them. The key is not to replace market financing, nor to provide a fallback for business failures, but to block the negative feedback loop of "redemption selling net asset value decline redemption" when necessary, and to maintain the bottom line of preventing systemic financial risks.

The significance of this tool lies not only in the scale of liquidity support it may provide, but also in its institutional existence itself being able to play a role in stabilizing expectations, "said Zeng Gang.

(Author Hu Yanming)