BANK OF CHINA Manila has been named as the clearing bank for renminbi (RMB) business in the Philippines, the lender said in a statement on Wednesday.
Bank of China said under the memorandum of understanding between the People’s Bank of China and the Bangko Sentral ng Pilipinas, the lender will be enable local financial institutions to transfer RMB funds and participate in China’s foreign exchange, security and bond markets.
“It will also help local banks expand their product scope and provide better convenience for clients and investors looking to enter the Chinese financial market, increase their RMB asset holdings, or diversify their investment portfolios,” the bank said.
Bank of China Manila however said its clearing facilities “will take time” to operationalize and its systems will need to be prepared.
“A clearing bank will not only make local RMB transactions easier in support of the already existing Philippine RMB Trading Community that was launched last year, it will also boost local investments and other financial activities, further strengthening the economic relationship between the Philippines and China,” said Bank of China Manila Country Head Deng Jun.
Mr. Deng said following the designation of a local RMB clearing bank, transactions using the currency are expected to grow.
“This new facility will help drive the currency’s use for payments and investments, further promoting cross-border settlements, trade financing, project investments, and loans. Ultimately, this projected surge in financial activity will foster the shared development of both countries,” Mr. Deng said.
Foreign direct investments may likewise rise with the increased international use of RMB through the clearing bank.
“We are keen on fully taking on our role as bridge between the Philippines and China by better facilitating RMB liquidity management and enhancing cross-border capital flows,” Mr. Deng said. “This in turn will attract quality Chinese direct investors who can contribute to the Philippines’ economic development by creating more job opportunities and raising the competitiveness of domestic firms.”
The bank said according to data from the Society for Worldwide Interbank Financial Telecommunication or SWIFT, the total amount of RMB cleared in the Philippines in the first semester surged 45.3% year-on-year to RMB 127.4 billion.
In terms of transactions, RMB clearing activities climbed 73.9% year-on-year to 12,116 in the same period.
Bank of China Manila led the signing of an agreement with banks operating in the country to create the Philippine RMB Trading Community in October last year.
The local lenders were Asia United Bank Corp.; Bank of Commerce; BDO Unibank, Inc.; Bank of the Philippine Islands; China Banking Corp.; East West Banking Corp.; Metropolitan Bank & Trust Co.; Philippine Bank of Communications; Philippine National Bank; Philippine Business Bank; Rizal Commercial Banking Corp.; Sterling Bank of Asia; Security Bank Corp.; and UnionBank of the Philippines, Inc.
With the peso-yuan exchange facility, companies and individuals trading with Chinese counterparts can directly convert payments and remittances to the renminbi in big volumes, doing away with passing through the US dollar.
The organization of the trading community is part of a three-stage Development Plan of Bank of China and Philippine Dealing System Holdings Corp. to develop domestic renminbi services.