International Finance Corporation issues RMB-denominated discount note
27 February 2013
News, China, Global
By Asia Asset Management
The International Finance Corporation (IFC), a member of the World Bank Group, introduced on Wednesday (February 27) an innovative financial instrument to help China internationalise its currency, issuing the first renminbi-denominated note under its Global Discount Note Program.
The program is the first of its kind, enabling the regular issuance of discount notes in the offshore renminbi market and expanding the availability of short-term local-currency finance for private enterprises in the region.
The discount note – equivalent to about US$50 million – is denominated in CNH – the deliverable form of the Chinese currency that is traded outside mainland China. The fast-growing CNH bond market was introduced as an offshore investment alternative to encourage greater renminbi-denominated trade between China and other countries. IFC is the first institution to launch a CNH discount note program to eligible institutional investors globally.
“The IFC discount note program introduces a new asset class for investors seeking high-quality credit, and short-term financing alternatives in the CNH market, contributing to the internationalisation of the renminbi,” said IFC Vice President and Treasurer Jingdong Hua. “It reflects IFC’s strategy to meet the growing demand for local currency loans, especially at the short end of the maturity spectrum.”
Standard Chartered Bank is the sole arranger for the Global Discount Note Program and the sole arranger of the renminbi issue.
Jaspal Bindra, Standard Chartered Group’s executive director and CEO for Asia, said: "IFC’s discount note program is yet another renminbi ‘first’ that Standard Chartered is proud to support. The launch of the program has positive implications for companies looking for renminbi-denominated financing, and for investors seeking exposure to the currency. We look forward to our continued involvement in the program as it develops.”
A discount note is a short-term debt obligation issued at a discount to par. Discount notes have maturities of up to one year and are typically issued by government-sponsored agencies or highly rated corporate borrowers.
The renminbi notes have a three-month maturity.
Supporting the development of domestic capital markets is a priority for IFC in China. In 2005, IFC became the first non-resident issuer of Panda Bonds – renminbi-denominated bonds issued in the domestic capital markets.
IFC also issues Dim Sum Bonds – renminbi-denominated bonds issued in the offshore renminbi capital markets. Last year, IFC committed the equivalent of $98 million in local currency to support health care, renewable energy, and access to finance for small and medium enterprises and other sectors.
IFC set up a US-dollar Discount Note Program and a Global Discount Note Program to increase its options for funding private sector development in emerging markets. Proceeds of the programs are used in part to fund the Global Trade Liquidity Program, a global initiative to address the shortage of trade finance resulting from the global financial crisis. In addition to issuing discount notes in US dollars and CNH, IFC is exploring opportunities to extend the program to other emerging-market currencies where there is demand for short-term local-currency finance.
IFC is rated triple-A by Moody’s Investors Service and Standard & Poor’s.
More News >
Discuss: International Finance Corporation issues RMB-denominated discount note