operational efficiency for offshore rmb
TRANSCRIPT
SWIFT’s role
• 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)
Facilitate
RMB
transactions
& automation
Broaden
industry
understanding
Provide
business
insights
HKIB Technology & Operations Forum, May 3 2012 2
Source: SWIFT. Customer initiated and institutional payments sent
RMB is underutilised vs China’s trade
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
EUR USD GBP JPY AUD CAD CHF SEK HKD SGD THB NOK DKK RUB CNY NZD ZAR HUF MXN TRY
Payments (September 2011, value) Trade (2010,value)
Currency
#15
September
2011
Currency
#21
June
2011
Currency
#35
October
2010
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BRIC economy growth in 2011 2011, 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 2011 2011, value of customer initiated and institutional payments, sent and received
Source: SWIFT
Source: SWIFT
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RMB payments development opportunity Source: SWIFT, September 2011, selected countries
HKIB Technology & Operations Forum, May 3 2012 5
RMB Payments (ex. China & HK) Q1 2011 – Q1 2012, value of customer initiated and institutional payments, sent and received
6
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011-Q1 2011-Q2 2011-Q3 2011-Q4 2012-Q1
Other Asia
Other ASEAN
Singapore
Americas
Africa & Middle East
Other Europe
United Kingdom
HKIB Technology & Operations Forum, May 3 2012
RMB FX Confirmations (ex. China & HK) Q1 2011 – Q1 2012, volume of FX confirmations, sent and received
7
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011-1 2011-2 2011-3 2011-4 2012-1
United Kingdom Other Europe Africa & Middle East Americas Singapore Other ASEAN Other Asia
HKIB Technology & Operations Forum, May 3 2012
RMB heat map
¥ ¥ ¥
¥ ¥
¥
New business Substitution
6
2
5 3.b
3.a
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
Trade finance:
same underlying trade,
no big RMB business
unless commodities shift
FX for trade payments: less in
China but more by foreign
corporates + those need hedging
Retail: new business,
but mainly for banks in
large offshore centres
like Hong Kong
FX trading: very big opportunity, RMB from 0.9% to 5% market share by 2020
Securities services: currently underdeveloped,
will increase with policy liberalisation, as more
RMB is held outside China, with product innovation
1
4
Account services and
liquidity reporting:
growing with RMB business
and banks seeking clearing
capability (38+% growth in
2010 vs 5-10% previous years)
Watch your back Go for it
Grow Push to keep market share
Source: SWIFT.
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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
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• 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 15022
messages to enhance STP rates for Offshore CNY transactions.
The Guidelines
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• 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
The Industry Challenge
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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
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• 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
Why doesn't SWIFT just create the currency code
CNH?
HKIB Technology & Operations Forum, May 3 2012 13
To develop your RMB business, call SWIFT
Develop business Understand implications
Offshore CNY
WG Guidelines
Increase automation
Detailed
statistics
Training course
RMB
internationalisation
Business Insights
report
September 2011
Automation
software
Automation
guidelines
Monthly tracker
White paper
Contact your SWIFT account manager, or
email [email protected] – RMB initiative director, SWIFT
HKIB Technology & Operations Forum, May 3 2012 14
Thank you
Lisa O’Connor
Initiative Director, RMB Internationalisation
SWIFT
+85296129066
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