China to set up central bank bills swap to support liquidity of banks' perpetual bonds

BEIJING (Reuters) - China's central bank plans to set up a central bank bills swap (CBS) in order to improve the liquidity of banks' perpetual bonds, it said on Thursday.

The setup of the CBS also aims to encourage banks to replenish capital via perpetual bond issuance, the People's Bank of China said in a statement on its website.

Banks' perpetual bonds with ratings at no lower than AA will be included as qualified collateral for a medium-term lending facility (MLF), a targeted medium-term lending facility (TMLF), a standing lending facility (SLF) and re-lending, according to the statement.

(Reporting by Min Zhang in Beijing and Meg Shen in Hong Kong; Editing by Alison Williams)