Payment Lesson from Other Countries – China & Hong Kong

Payment Lesson from Payment Lesson from Other Countries – China & Other Countries – China & Hong KongHong KongSeptember 2013September 2013

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ContentsContents

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Introduction of RMB Business Introduction of RMB Business

• The Scopes of RMB business can The Scopes of RMB business can be divided into TWO parts:be divided into TWO parts:

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• Explosive growth in RMB Explosive growth in RMB offshore marketoffshore market

From: HKMA, Sept 2013From: HKMA, Sept 2013

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• Explosive growth in RMB Explosive growth in RMB offshore marketoffshore market

From: HKMA, Sept 2013From: HKMA, Sept 2013

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Challenges EncounteredChallenges Encountered

• Various restrictions existVarious restrictions exist

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• Local payment system in China Local payment system in China involvedinvolved

– CChina hina NNational ational AAdvanced dvanced PPayment ayment

SSystemystem• A local payment system in ChinaA local payment system in China• Different payment message type (CMT vs Different payment message type (CMT vs

SWIFT MT)SWIFT MT)• System in ChineseSystem in Chinese

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• Local payment system in China Local payment system in China involvedinvolved– All cross-border payments must be All cross-border payments must be

processed by the RMB Clearing Bank at processed by the RMB Clearing Bank at the beginning the beginning

A bank in Hong KongA bank in Hong Kong

SWIFT MT

SWIFT MT

A bank in ChinaA bank in China

CMTCMT

Different formats and Chinese characters Different formats and Chinese characters may be includedmay be included

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SolutionsSolutions

• Regulatory relaxationsRegulatory relaxations– Various measures announced by the Various measures announced by the

People’s Bank of China and the Hong People’s Bank of China and the Hong Kong Monetary Authority to further Kong Monetary Authority to further complete the RMB businesscomplete the RMB business

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SolutionsSolutions

• Regulatory relaxationsRegulatory relaxations

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SolutionsSolutions

• System enhancements & System enhancements & developmentsdevelopments– The RMB Clearing BankThe RMB Clearing Bank

• Complied a set of rules for straight processing Complied a set of rules for straight processing on RMB cross-border paymentson RMB cross-border payments

• Chinese characters conversionChinese characters conversion

– Introduction of RMB RTGS in 2007Introduction of RMB RTGS in 2007• The only offshore RTGS system denominated in The only offshore RTGS system denominated in

RMBRMB• A replica of HKD RTGS A replica of HKD RTGS • A wide range of clearing and settlement A wide range of clearing and settlement

functions functions

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SolutionsSolutions

• Persistent communications with Persistent communications with monetary authoritiesmonetary authorities– Renminbi Services Committee in the Renminbi Services Committee in the

Hong Kong Association of Banks Hong Kong Association of Banks provides a forum to discuss industry-provides a forum to discuss industry-wide issues arising out of the provision wide issues arising out of the provision of RMB banking services in Hong Kongof RMB banking services in Hong Kong

– Communications between the Renminbi Communications between the Renminbi Services Committee and the PBoC and Services Committee and the PBoC and HKMA help improving the RMB payment HKMA help improving the RMB payment practicepractice

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What We Have LearntWhat We Have Learnt

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Recent Trends in RMB PaymentsRecent Trends in RMB Payments

• Allow foreign banks to join the Allow foreign banks to join the local clearing networklocal clearing network directlydirectly– CIPS: CIPS: CChina hina IInternational nternational PPayment ayment

SSystemystem• PBoC announced the development of CIPS in 2011PBoC announced the development of CIPS in 2011• CIPS is most likely to operate in CHIPS way, but need CIPS is most likely to operate in CHIPS way, but need

to fulfill the regulations set by PBOC or SAFE to fulfill the regulations set by PBOC or SAFE • Allowing 50 to 100 Chinese and international major Allowing 50 to 100 Chinese and international major

banks to become members, to settle and clear RMB banks to become members, to settle and clear RMB payments through CIPS directlypayments through CIPS directly

• Other financial institutes in the world can establish Other financial institutes in the world can establish corresponding bank relationships with the CIPS corresponding bank relationships with the CIPS members for clearing and settlement RMB payments members for clearing and settlement RMB payments through CIPSthrough CIPS

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• Allow foreign banks to join the Allow foreign banks to join the local clearing networklocal clearing network directlydirectly– Payment systems in certain provinces Payment systems in certain provinces

allow banks outside China to join allow banks outside China to join directlydirectly• Shenzhen Finance Settlement System Shenzhen Finance Settlement System

(SZFSS)(SZFSS)– Allow banks in Hong Kong to join the SZFSS, to Allow banks in Hong Kong to join the SZFSS, to

settle Renminbi payments between Hong Kong settle Renminbi payments between Hong Kong and Shenzhen directlyand Shenzhen directly

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• Focus started to shiftFocus started to shift

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• Focus started to shiftFocus started to shift

From: HKICL, Sept 2013From: HKICL, Sept 2013

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• Focus started to shiftFocus started to shift– With the expanded RMB business With the expanded RMB business

scopes, more and more products & scopes, more and more products & services have been developed and services have been developed and provided for customersprovided for customers

– The daily RMB clearing value reached to The daily RMB clearing value reached to 250 billion in 2012250 billion in 2012

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Payment Lesson from Other Countries – China & Hong Kong