Renminbi Clearing Centers and Banks Worldwide Insights

Budapest Renminbi Initiative Plenary Meeting RMB Settlement and Clearing Perspectives Session Role of Renminbi Clearing Centers and Banks around the World Lajos Bartha Director, Financial Infrastructures Central Bank of Hungary 26 March 2015 1

Internationalization of RMB Liberalization of Chinese financial markets Cross-border capital flows Internationalization of RMB mainly through offshore RMB centers Value of Chinese foreign trade and the ratio of RMB Total value of Chinese foreign trade (billion RMB) Ratio of settlements in RMB (%) Magyar Nemzeti Bank Source: CEIC, SWIFT 2

Internationalization reflects in payments Growth in RMB payments between July 2013 and 2014 (SWIFT): UK: 123,6% Germany: 116% France: 43,5% Lux: 41,9% Magyar Nemzeti Bank 3

RMB Clearing arrangements worldwide Date of MoU clearing arrangement Date of designation for clearing bank Country/City Clearing bank Hong Kong 19.03.2009 BoC 2007 Singapore 08.04.2013 ICBC 08.02.2013 Frankfurt 28.03.2014 BoC 19.06.2014 London 31.03.2014 CCB 18.06.2014 Luxembourg 28.06.2014 ICBC 23.09.2014 Paris 30.06.2014 BoC 23.09.2014 South Korea 03.07.2014 BoC 14.07.2014 Qatar 13.11.2014 ICBC 14.11.2014 Magyar Nemzeti Bank 4

Advantages of an official clearing banks designation official clearing banks can borrow liquidity from PBOC ensure easier access to Chinese markets Parent bank in CHN Customer / other bank Clearing bank Chinese RTGS presumably faster, cheaper and comfortable payment services for customers receive quotas to the onshore financial markets Magyar Nemzeti Bank 5

Potential drivers for increasing payment turnover in the CEE region Trade of goods between China and Hungary China is a major trading partner: concerning import of goods to Hungary the 4th largest since 2005 Since 2008 constantly growing number of Chinese companies in Hungary (~300), e.g. Wanhua or Huawei Chinese population in Hungary has doubled in the last 15 years and exceeded 11.000 Increasing Chinese economic activity in the CEE region billion HUF 1,400 1,200 1,000 800 600 400 200 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Import from China to Hungary Export from Hungary to China Source: Hungarian Statistical Office Magyar Nemzeti Bank 6

Setting up a clearing arrangement in Hungary in the framework of the Budapest RMB Initiative: two steps (i.e. allowing execution of payment transactions initiated in RMB among account holders within the bank and also carrying out cross-border RMB payments through its parent bank) 1. Chinese bank provide correspondent banking services, maintain RMB payment accounts for banks and companies official clearing bank designation by the PBOC is necessary for smooth service provision, Hungary would like to become the gate to CEE region MoU between the PBOC and MNB 2. In the long run if the RMB payment turnover reaches a much higher volume, establishment of a clearing system with the possible involvement of the Hungarian ACH (GIRO) owned by MNB Magyar Nemzeti Bank 7

Thank you for your attention! Magyar Nemzeti Bank 8