Bank of China (Malaysia) appointed clearing bank for RMB business in Malaysia

KUCHING: The People’s Bank of China (PBoC) has announced its decision to authorise Bank of China (Malaysia) Ltd to act as the clearing bank for remimbi (RMB) business in Malaysia.

Bank Negara Malaysia (BNM) in a note said the RMB clearing bank is another important milestone in the country’s financial cooperation between Malaysia and China.

Thus, the central bank hopes to build on the deep relationship between the two countries to enhance the confidence and commitment to the future trend in RMB business in Malaysia.

BNM said,”With the majority of RMB clearing banks located in advanced economies, the designation of a RMB clearing bank for Malaysia, first emerging economy in Asia outside China, is an important recognition on the important role of Malaysia as a key RMB offshore centre.

“Malaysia will continue to strengthen its unique position as a RMB offshore centre in this region to support the investment and trade flows between China and Asean region.

“With its direct access to the China onshore financial markets, the presence of a designated RMB clearing bank in Malaysia will allow Malaysian financial institutions to offer competitive RMB costs to facilitate corporations in obtaining cost effective RMB trade and investment financing as well as for hedging activities,” the central bank said.

Meanwhile, BNM observed that based on the Society for the Worldwide Interbank Financial Telecommunication (SWIFT) data statistics, the total RMB clearing amount in Malaysia hit 1.15 trillion yuan in the first half of 2014, an increase of 104.5 per cent from 2013.

The central bank said the SWIFT RMB Tracker report in July 2014 ranked Malaysia as one of the top ten offshore RMB centres in the world.

It noted trade settlement volume has also tripled since 2010 to RM3 billion in 2013 while RMB deposits in Malaysia have also expanded by more than ten fold to the current figure of 10.7 billion yuan since 2010.

The central bank said by 2013 RMB foreign exchange (FX) volume had reached more than 15 times the amount in 2010.

It revealed the latest statistics showed that average daily RMB FX volume is around US$580 million per day in 2014.

Additionally, BNM said Malaysian corporates are starting to issue RMB bonds to tap the vast potential of this new market.

To date, it observed there have been four Malaysian firms which had issued RMB-denominated bonds amounting to RMB4.4 billion.

The central bank recalled that in October 2011, Khazanah Nasional Bhd (Khazanah) has successfully issued the world’s first offshore RMB denominated sukuk.

It said the issuance was well received, and drew a demand of 3.6 bid to cover ratio, thus enabled an upsized issuance of 500 million yuan from an earlier announced amount of 300 million yuan.

The central bank added the recent RMB bond issuance by Cagamas Bhd in September 2014 is the largest RMB bond in Southeast Asia to date, and the world’s first RMB bond to be issued by a mortgage corporation.

BNM pointed out that the issuance was also the first RMB and non-ringgit denominated bond to be settled through Malaysia’s Real-time Electronic Transfer of Funds and Securities System, operated and managed by the Malaysian Electronic Clearing Corporation Sdn. Bhd.

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