The Hong Kong Monetary Authority has partnered with Euroclear Bank and JP Morgan Worldwide Securities Services for a service that enables wider investment access by international financial institutions into Hong Kong.

The new cross-border collateral management service launched in 25 June and allows firms to use securities held with Euroclear or JP Morgan as collateral in triparty repo transactions with members of HKMA's Central Moneymarkets Unit, specifically the Hong Kong dollar and offshore renminbi. Repo refers to repurchase agreements, which are money-market instruments used to raise short-term capital.

The service aims to develop and promote a cost-effective repo market in the city, which in turn helps enhance financial stability through the use of collateral to cover exposures in lending and borrowing.

This is the first add-on service following the March 2012 launch of the pilot platform for cross-border investment and debt securities settlement. Further collateral management developments are expected to be rolled out in the second half of this year.

"The service will facilitate the expansion of cross-market renminbi funding activities and further strengthen Hong Kong's role as the global hub for offshore renminbi business," said Peter Pang, deputy chief executive of the Hong Kong Monetary Authority.