Banks jump on the RMB superhighway
Banks have been quick to participate in the China International Payment System (Cips) and Sibos has provided the perfect opportunity for them to boast of their involvement. The payments infrastructure, which was launched on 8 October, was described as a “milestone” by Helen Yun, managing director and head of financial institutions China, Bank of America Merrill Lynch. Speaking during the Developing your transaction business with China session on Tuesday, she said the launch came at the right time, just a few days before Sibos opened.
In the first phase of the payment system, 19 banks were chosen by the People’s Bank of China (PBOC) to be direct participants in the clearing infrastructure for cross-border renminbi (RMB) payments. The direct banks include foreign institutions that are registered in China, as well as domestic Chinese banks. The foreign banks included ANZ, Citi, Deutsche Bank, HSBC and Standard Chartered, who have used Sibos as an opportunity to talk about their participation in Cips.
The system provides a more efficient alternative for financial institutions and corporates, which currently have to make payments to mainland China either through the correspondent banking network, or through a clearing bank in an offshore centre. Cips uses global payment standards and enables same-day clearing across Asia, Oceania, Europe and other time zones through extended operating hours.
On the day the payment system was launched, Standard Chartered – along with others – issued a release to declare their first landmark transaction. Standard Chartered’s first transaction on the RMB superhighway was for Ikea, the Swedish retailer, for a clearing transaction from China to Luxembourg.
In a press briefing at Sibos on Monday, Michael Vrontamitis, head of trade, product management, transaction banking at Standard Chartered, said: “For us Cips is an infrastructure that enhances China’s connectivity with the global financial system.” He added that it “significantly shifts the efficiency of making payments into and out of China”.
Prior to Cips, Vrontamitis explained, payments into China had twice the rejection rate of other payments. This was because of the translation issues. All payment messages into China had to be translated into Chinese in order to be processed on the domestic network, China National Advanced Payment System (CNAPS). These problems of translation have now been eradicated because Cips is multilingual.
HSBC also declared its involvement on Cips, but didn’t name the first customer to use the payment system. At the time of the announcement, Helen Wong, HSBC’s Greater China chief executive, said: “The establishment of Cips is an important milestone in RMB internationalisation, providing the infrastructure that will connect global RMB users through one single system.”
Deutsche Bank announced it had been selected as one of the first approved direct participants in Cips. Carl Wegner, managing director, Greater China head of global transaction banking at Deutsche Bank, said: “By integrating the existing renminbi cross-border payment and settlement channels, Cips will improve the efficiency of cross-border clearing to meet the increasing demand for renminbi worldwide. Cips will also enhance and facilitate the security of transactions, thereby benefiting the industry as well as our clients.”
Feng Gao, managing director, chief country officer of Deutsche Bank China, added: “We are proud to be one of the few foreign banks chosen to participate in Cips. This new clearing system represents important additional financial market infrastructure for cross-border payments and bodes well for the ongoing internationalisation of the currency.”
While many of the banks involved are speaking about their involvement, details of the technology itself were kept under wraps, with the participant banks having signed non-disclosure agreements with the PBOC. Although there are vendors who have the capability to provide the infrastructure to the central bank, it is believed that China built this new system itself. Bankers at Sibos seemed confident that Cips would be capable of coping with the increasing volumes of an internationalising RMB.