BoE and PBOC agree on renminbi clearing and settlement in the UK
The bank to be named for clearing and settlement has yet to be determined according to Reuters. A clearing bank is considered a politically sensitive subject in China, and is usually a domestic entity, with Bank of China and ICBC seen as the leading contenders for this role, according to trade sources last month. David Pavitt, head of emerging markets FX trading at HSBC London, said when Singapore signed a similar agreement on yuan clearing with the PBOC last year, it took around six weeks to name the bank handling the clearing.
London, Hong Kong and Singapore are all vying to become dominate offshore trading hubs for RMB. Singapore, as LeapRate reported this week, is chipping away at Hong Kong on trade volume for RMB, but still only has one third of the volumes as Hong Kong over in the Asia Pacific region. This deal between the BoE and PBOC is set to give London a clear head start to Europe RMB trade.
Just on the European soil there is fierce competition among Europe’s major financial centres for yuan trading, with Frankfurt and Luxembourg vying with London to become the top destination. London, will now be a step ahead for local clearing and settlement and should draw a lot of business of those who conduct business in RMB. David Pavitt goes on to say about the deal: “”The process for clearing later in the day is currently a little cumbersome, unlike paying and receiving dollars or euros. This next step should make that process in RMB simpler,” he said.
London is the world’s largest trade centre for foreign exchange, but it currently mainly relies on Hong Kong’s offshore yuan infrastructure to obtain yuan liquidity and clearing services. Clearing yuan is London is now set to change with this historic deal between East and West. LeapRate will be sure to follow up on this story and report on the bank that is to be named as part of the deal.
For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.