Euroclear Bank to settle transactions in renminbi

Euroclear Bank’s clients will soon be able to settle transactions and deposit Eurobonds and Hong Kong domestic securities denominated in renminbi.

The Brussels-headquartered bank has an operations centre in Hong Kong and as such sees itself as ideally positioned to support the booming renminbi-denominated securities market. The first transactions in renminbi may be settled on September 27.

Olivier Grimonpont, regional head and general manager of the Euroclear Bank branch office in Hong Kong, says the steady supply of Eurobond issues to date, of increasing sizes and tenors, demonstrates a growing market appetite for such securities.

According to the People's Bank of China (PBoC), the volume of global trade settled in renminbi has grown from Rmb3.6 billion in the first half of 2009 to Rmb70.6 billion in the first half of 2010. Many in the industry see this as a major development for a whole new investor base.

"As offshore borrowers look to raise funding in renminbi or to broaden their investor base, investors will be able to settle these transactions in Euroclear Bank and eliminate foreign exchange risk by having to settle in alternative currencies," notes Gimonpont.

Chinese authorities have introduced various measures to liberalise renminbi trading following the announcement on the de-pegging of the RMB from the dollar.

In July, the PBoC and the Hong Kong Monetary Authority signed an agreement to expand an existing RMB trade-settlement scheme. It is aimed at developing Hong Kong as a centre for the internationalisation of the currency.

Euroclear has had a presence in Asia since 1987. The Honk Kong office was previously headed by Philippe Dirckx. Grimonpont moved to Hong Kong from Brussels in June. In Belgium, he was head of collateral management services.

This news follows a similar service announcement last month by Clearstream, Deutsche Börse. Over 300,000 domestic and internationally traded bonds, equities and investment funds are deposited with Clearstream, according to its website.

Given recent changes to regulations governing the operation of  RMB offshore cash accounts in Hong Kong, the RMB will be available as a full settlement currency in Clearstream through a cash correspondent bank in Hong Kong.

Euroclear Bank provides settlement and related securities services for cross-border transactions involving domestic and international bonds, equities, derivatives and investment funds. Serving major financial institutions located in more than 90 countries, Euroclear Bank is part of the Euroclear group.

The group settled the equivalent of more than €514 trillion ($660 trillion) in securities transactions in 2009, representing 180 million domestic and cross-border transactions, and held more than €20 trillion in assets for clients. It has more than 1,400 clients worldwide.