Swiss put in bid for yuan clearing

A yuan exchange site at a cross-border trade area in Dongxing, Guangxi Zhuang autonomous region. Since 2009, the People's Bank of China has established currency swap lines with 23 foreign central banks.[Photo/Xinhua]

Swiss bankers made their strongest pitch yet to their Chinese peers over the weekend for their country to become a hub for offshore yuan trading.

They proposed a currency swap line and a clearing facility, which will help Switzerland compete with London and Frankfurt, Germany, in the race to be Europe's hot spot for yuan-related transactions.

"Swiss banks are greatly in favor of a currency agreement (swap line) between the Swiss National Bank and the People's Bank of China, and thus for clearings through a Chinese bank based in Switzerland," the Swiss Bankers Association said in a statement on Saturday after the first Chinese-Swiss Financial Round Table was held in Switzerland with the visiting China Banking Association. That will "lower transaction costs and highlight Switzerland's position as a European hub for Chinese and renminbi business," it added.

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The statement didn't specify timing for the currency swap line and the clearing facility to be set up. The moves are critical for yuan-related businesses because they enable a supply of yuan liquidity in case of a shortage by allowing access to China's onshore currency market.

Switzerland, home to many of the world's biggest banks, including UBS AG and Credit Suisse Group, is trailing its European peers in the race. The People's Bank of China, the nation's central bank, announced on Sunday that it plans to set up clearing banks for the yuan in Paris and Luxembourg.

On June 18, Europe's first yuan-clearing facility was set up in London as the PBOC-designated China Construction Bank Co, one of China's Big Four State-owned banks to clear yuan-related transactions in the British capital.

Since 2009, the PBOC has established currency swap lines with 23 foreign central banks, totaling 2.5 trillion yuan ($406 billion), as it accelerates the yuan's international push in hopes that the currency will one day stand alongside the dollar and euro as one of the world's reserve currencies.

A report published in March by the International Monetary Institute of Renmin University said that the yuan will overtake the British pound and Japanese yen within three years in terms of application in global trade and investment. Between 2030 and 2040, the yuan is predicted to join the dollar and euro to anchor the international monetary system.

Chen Yuannian, secretary-general of the China Banking Association, said in the statement: "The Swiss Financial Center has expanded renminbi business extensively, serving clients in China, Switzerland and elsewhere in the world. This is favorable for not only the development of Swiss enterprises but also for the internationalization of the renminbi."

The China Banking Association and Swiss Bankers Association also signed a memorandum of understanding as a "sign of their mutual understanding and willingness to proceed on the chosen path", according to the statement.