Potential developments in market infrastructures to address the needs of future RMB payment transactions
SWIFT, in collaboration with its members, today published a new white paper on RMB internationalisation, highlighting the importance of having an enhanced payment processing infrastructure that is compatible with global payment systems and allows for seamless routing of payments as the Chinese currency is increasingly used around the globe.
The new white paper, RMB internationalisation: Perspectives on the future of RMB clearing, demonstrates SWIFT’s continued commitment to help financial institutions capitalise on the opportunities arising from the growing international use of the Renminbi (RMB). It is especially relevant for those who are interested in the future of RMB clearing and for transaction bankers who are actively involved in the offshore RMB business.
The paper was created with contributions from Bank of America Merrill Lynch, Bank of China (Hong Kong), Bank of Communications, Citibank, HSBC, J.P. Morgan, Royal Bank of Scotland and Standard Chartered Bank.
Patrick de Courcy, Head of Markets and Initiatives, Asia Pacific, SWIFT, says: “The RMB is already an important currency for trade finance. We are now moving into the next stage of development, where we see growth in the RMB for investment purposes. It is timely that we published this paper at Sibos, where this topic will be addressed in a series of sessions throughout the week.”
SWIFT business intelligence data, collected from more than 10,000 financial institutions across 212 countries, shows tremendous growth in the position of RMB in the ranking of world payment currencies, advancing from number 35 in October 2010 to number 14 in August 2012.
“The existing arrangement for offshore RMB clearing has served the industry well to-date. In the medium-to-long term, however, it is important that we have an enhanced platform that can address the need for longer operating hours to cover various time zones and lower the amount and cost of liquidity required to support these transactions. This white paper will be a practical point for dialogue related to the development of a future cross-border RMB clearing system,” adds de Courcy.
In this white paper, SWIFT and the industry editorial board reviews the key milestones in RMB internationalisation and examines the current infrastructure and various offshore RMB centres. Market expectations around the future RMB clearing systems are also addressed.
Last year, SWIFT published its first RMB white paper (“RMB internationalisation: Implications for the global financial industry”), and the global cooperative has made facilitating the internationalisation of the RMB a major priority. In 2011, SWIFT facilitated Offshore CNY Working Groups in order to address straight-through-processing issues around offshore Chinese Yuan instruments, which resulted in publication of the “Offshore CNY Guidelines for SWIFT MT and ISO15022” in February 2012 and updated in July 2012. SWIFT’s RMB Tracker provides monthly insights and data about RMB internationalisation in order to broaden the market’s understanding of the benefits of the RMB. SWIFT now also has expanded its Business Intelligence offering with consulting work that allows for flow analysis, tracking market evolution and benchmarking versus the market, as well as a series of training courses.
Lisa O’Connor, Initiative Director, RMB Internationalisation, says: “The primary goal of a future RMB clearing system is to support the need for seamless routing of RMB payments not only within China but for RMB payments around the world. It is also critical that the community is able to exchange electronic payment information in globally-accepted message standards such as ISO20022, because the use of international and reference data standards will improve the quality and efficiency of the clearing system.”
“A future RMB clearing system is expected to create efficiency. There will, however, be some challenges for the industry related to the translation of international standards, reference data and the use of non-Latin characters,” says de Courcy.
“Through our engagement with banks on the future of RMB clearing, it has become clear that there are other areas where banks are looking for SWIFT’s support. We will continue to work with the financial services community to facilitate the seamless global processing of payments in RMB.”