Operational Efficiency for Offshore RMB

Transcription

1 Operational Efficiency for Offshore RMB Lisa O Connor, SWIFT May 2012

2 SWIFT s role Facilitate RMB transactions & automation Broaden industry understanding Provide business insights Provide a global network Facilitate the Offshore CNY working groups with the common goal of increasing automation by publishing a set of market guidelines SWIFT integration products and services. RMB White Paper Participate and organise industry events to discuss the increasing international use of the RMB RMB education webinar on operational aspects RMB Business Insights report with key statistics Bespoke insight services (e.g. peer comparisons) HKIB Technology & Operations Forum, May

3 RMB is underutilised vs China s trade Source: SWIFT. Customer initiated and institutional payments sent Payments (September 2011, value) Trade (2010,value) 45% 40% 35% 30% 25% 20% Currency #15 September 2011 Currency #21 June 2011 Currency #35 October % 10% 5% 0% EUR USD GBP JPY AUD CAD CHF SEK HKD SGD THB NOK DKK RUB CNY NZD ZAR HUF MXN TRY HKIB Technology & Operations Forum, May

4 BRIC economy growth in , value of customer initiated and institutional payments, sent and received % Growth Brazil BRL 2% Russia RUB 7.4% India INR 4.1% China CNY 14.8% Payments currency evolution , value of customer initiated and institutional payments, sent and received Source: SWIFT Source: SWIFT HKIB Technology & Operations Forum, May

5 RMB payments development opportunity Source: SWIFT, September 2011, selected countries HKIB Technology & Operations Forum, May

6 RMB Payments (ex. China & HK) Q Q1 2012, value of customer initiated and institutional payments, sent and received 100% 90% 80% 70% 60% 50% 40% 30% Other Asia Other ASEAN Singapore Americas Africa & Middle East Other Europe United Kingdom 20% 10% 0% 2011-Q Q Q Q Q1 HKIB Technology & Operations Forum, May

7 RMB FX Confirmations (ex. China & HK) Q Q1 2012, volume of FX confirmations, sent and received 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% United Kingdom Other Europe Africa & Middle East Americas Singapore Other ASEAN Other Asia HKIB Technology & Operations Forum, May

8 RMB heat map Source: SWIFT. Trade settlement and payments clearing: same payment now in RMB, but reaching more corporates in China can increase overall trade. Market share opportunity for Chinese and global banks but shifting USD to RMB clearing Securities services: currently underdeveloped, will increase with policy liberalisation, as more RMB is held outside China, with product innovation FX trading: very big opportunity, RMB from 0.9% to 5% market share by 2020 Trade finance: same underlying trade, no big RMB business unless commodities shift Watch your back 2 Push to keep market share 4 Substitution 3.a Go for it Grow FX for trade payments: less in China but more by foreign corporates + those need hedging 5 3.b 1 6 New business Account services and liquidity reporting: growing with RMB business and banks seeking clearing capability (38+% growth in 2010 vs 5-10% previous years) Retail: new business, but mainly for banks in large offshore centres like Hong Kong HKIB Technology & Operations Forum, May

9 How to get ready? 1. Decide on your RMB strategy 2. Keep close eye on changing policy 3. Pay attention to corporate customers needs 4. Keep track of new RMB product developments 5. Look to achieve straight-through-processing of the RMB flows to allow operations to scale with business demand 6. Engage in industry discussions on operational efficiency for this growing market HKIB Technology & Operations Forum, May

10 The Guidelines Industry stakeholders approached SWIFT on challenges surrounding offshore Chinese Yuan operations, in particular concerns regarding straight-through-processing. As an agreed action at a meeting held April 2011, SWIFT assisted the market to establish 3 working groups: - The Cash & Trade Group - The FX, MM, Derivatives Group - The Investor Perspective Group Objective: to agree on guidelines for the SWIFT MT and ISO messages to enhance STP rates for Offshore CNY transactions. HKIB Technology & Operations Forum, May

11 The Industry Challenge The purpose of the groups is to look at this common industry challenge from a middle/back office transaction processing perspective not an exchange rates or valuation perspective There was a need for a tactical solution since banks proprietary, vendor operated and SWIFT systems are all based on ISO currency codes The group recognises that CNY is the only approved ISO currency for Offshore and Onshore RMB because there are other existing codes (CNT) and there is a possibility of new codes created by front office system in the future (CNS?, CNL?, etc.) This is for an interim period and there is the ability for other codes to appear because of price differences therefore it is the groups belief that a new ISO currency code will not be approved HKIB Technology & Operations Forum, May

12 The Industry Challenge The operational challenges started because firms are using the code CNH (that is being passed from the front office) for dealing of Offshore CNY Once the code CNH is passed to the middle or back office, CNH is likely to be translated to CNY for settlement, because CNH is NOT a valid ISO 4217 currency code and therefore not able to be processed in systems The majority of these transactions are currently being processed outside of STP channels As volume of transactions increases, this practice is hindering STP and could be prohibitive to business growth HKIB Technology & Operations Forum, May

13 Why doesn't SWIFT just create the currency code CNH? Simply put this is not SWIFT decision Any source can submit an application for a currency code however it needs to be substantiated Confirmation by a Central Bank or by the institution responsible for the currency is required The Maintenance Agency Secretariat for the ISO currency codes is SIX Interbank Clearing Ltd HKIB Technology & Operations Forum, May

14 To develop your RMB business, call SWIFT Understand implications Develop business Increase automation RMB internationalisation Business Insights report Offshore CNY WG Guidelines Automation guidelines September 2011 White paper Detailed statistics Monthly tracker Training course Automation software Contact your SWIFT account manager, or RMB initiative director, SWIFT HKIB Technology & Operations Forum, May

15 Thank you Lisa O Connor Initiative Director, RMB Internationalisation SWIFT lisa.oconnor@swift.com HKIB Technology & Operations Forum, May