The Bank of England and the People's Bank of China plan to sign a 3-year currency swap deal that facilitate easy finance of trade and investment between the two countries.
In a statement released on Friday, BoE Governor Mervyn King said, "In the unlikely event that a generalised shortage of offshore renminbi liquidity emerges, the Bank will have the capability to provide renminbi liquidity to eligible institutions in the UK."
"Our announcement today marks a significant milestone in constructive bilateral dialogue between the Bank and the PBoC," King said.
The renminbi/sterling currency swap arrangement would support domestic financial stability should market conditions warrant.
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