ICBC boosts yuan clearing business

Industrial and Commercial Bank of China Ltd, China's largest commercial lender, is boosting its yuan clearing business, in a bid to extend its global footprint.

The bank's Singapore branch - the first yuan clearing bank outside China - has seen continuous growth in clearing volume and value since it formally kicked off that business in late May.

Zhang Weiwu, general manager of ICBC Singapore, said the bank conducted yuan clearing deals worth about 82 billion yuan ($13.26 billion) in July, surpassing June's 60 billion yuan.

"Based on the inward and outward value, the amount reached 250 billion yuan, with 4,700 transactions," Zhang told China Daily.

Regional banks are gradually expanding their yuan clearing activities in Singapore. So far, 57 banks have participated in ICBC's clearing system, and the figure is expected to increase, according to Zhang.

The impressive value of ICBC's yuan clearing business in Singapore was also boosted by the yuan bonds issued by four major Singaporean banks.

"The business volume and value show great promise and have exceeded my expectations. Almost every week we see a new bank coming to open a clearing account with us," Zhang said.

He added that Hong Kong's first-mover advantage has posed some challenges to the development of the yuan clearing and settlement business in Singapore, as many local and regional financial institutions have already opened nostro accounts and conducted yuan business there.

"Our entry into the clearing business introduced competition into the market and thus benefited financial institutions with better services, competitive fees and deposit rates. We are beginning to see some results," he said.

Before the People's Bank of China allowed ICBC to conduct its yuan clearing business in February, such services could only be provided by Bank of China Ltd's units in Hong Kong, Macao and Taipei.

Zhang said ICBC Singapore has offered a number of preferential measures for yuan clearing activities to gain greater acceptance among financial institutions.

The branch has recruited 32 employees since the beginning of the year for its treasury and clearing business.

"Despite a good start, we're still at an early stage and face numerous challenges," said Zhang, who added he is confident that with close coordination and cooperation between the bank and its regulators it will be easier for issues to be resolved.

ICBC Singapore is also planning to cooperate with the Monetary Authority of Singapore to promote its services to financial institutions based in Southeast Asian countries so that they settle their yuan business in Singapore, he said.

"Surely kicking off RMB clearing services is a key milestone for ICBC and will get us well positioned in all types of RMB business, which is a key sector for ICBC's global development," Zhang said.

With more than 130 employees, ICBC Singapore has one sub-branch and two remittance centers in Singapore, which will be upgraded to two sub-branches later this year once approval is obtained from the regulator.

The bank has total assets of $8.5 billion in Singapore, ranking ninth among the top 10 foreign banks with a qualified full-bank license in the country.

Zhang said about 40 percent of the total assets are yuan assets. By the end of June, the bank had yuan deposits of nearly 8 billion yuan, accounting for 60 percent of total deposits.

"Chinese banks here have a major advantage in the renminbi business. The bank will leverage on this to develop and expand our business in the region," he added.

Luo Xi, senior executive vice-president of ICBC, said earlier that the internationalization of the yuan would be a long process, and setting up a clearing bank at the local level would also facilitate the wider acceptance of the currency.

ICBC is in talks with three major banks in Singapore to develop an offshore yuan interest rate and foreign exchange products, according to Luo.

The lender is also exploring cooperation possibilities with local banks to issue bonds together, develop wealth management products, yuan cross-border flow solutions and cash management products.

Zhang said that apart from the natural growth in market demand, the banks' product innovation and guidance to clients will play a substantial role in promoting wider acceptance of the currency.

"In addition, the development of the renminbi business also relies on relevant regulation and policies, which calls for strengthened communication between the local authority and China's central bank," he said.

"We need more favorable policies to encourage wider use of the renminbi among companies and thus accumulate a sustainable RMB asset pool," Zhang added.

He said the bank is also eyeing opportunities related to individual yuan settlement deals and RMB Qualified Foreign Institutional Investors projects.

"Currently, more than half of my work arrangements have something to do with the renminbi business. We're also constantly innovating and enhancing our clearing services such as systems, service hours, overdrafts and client collateral to provide participating banks with more efficient services," he said.

"We also actively engage the key players to get their feedback and suggestions for improvements," he added.

Zhang said ICBC is also gearing up to extend yuan loans to banks by using Singapore bonds as collateral.

"By leveraging on its strength and competitive advantage in the renminbi business, we hope ICBC Singapore branch can consolidate its position as a leading bank in the renminbi business in Singapore, contribute more to the development of the renminbi market and further facilitate bilateral trade and investment cooperation".