Recent data from SWIFT’s RMB Tracker shows that London has retained its position as the preeminent foreign exchange (FX) and payment centre globally. It remains the dominant offshore hub for trading the Chinese renminbi (RMB).
As of March 2017, SWIFT’s data shows that 36.3% of the RMB FX transactions (excluding China) are conducted with the UK. Hong Kong is second (29.3%) and the United States and France third (7.3%) ahead of Singapore (5%). There has also been a steady increase in RMB FX transactions over the last five years, with the number of FX trades in RMB reaching more than 13 million in 2016.
Other FX highlights from the report include:
RMB ranks fifth as a world FX currency in terms of trading value, behind the USD, EUR, JPY and GBP;
RMB and USD is the fifth highest currency pair in nominal amount for trades not settled in CLS;
Monthly turnover of the RMB has reached over 4.3% of total turnover confirmed over SWIFT (as of March 2017).
Trading and payments in RMB in the UK also continues to grow, supported by usage of the RMB in both global and domestic markets, adds SWIFT. While payments to and from the UK transverse a multitude of markets around the world, SWIFT data shows that the UK-US corridor was the most important, accounting for 38% of international payments sent and received by the UK in March 2017. Additional payments insights from the report include:
More than 50% of UK payments transactions (all currencies) are conducted with two countries, US (38%) and Germany (16%);
RMB is the top currency for payments between the UK and China/Hong Kong;
50% of financial institutions in the UK (and 1,300 financial institutions around the world) are using the RMB to exchange payments with Hong Kong and China;
London is the largest RMB payments centre outside of greater China with a 5.66% share (behind Hong Kong with a 76.14% activity share but well above Singapore at 4.19%).
“This data demonstrates that London is a top choice for international banking activity, says Javier Pérez-Tasso, chief executive, Americas and UK, SWIFT. “Despite a decline in global FX trading volumes and broader market uncertainties, London’s role as a global financial centre and international payments hub remains on a strong footing."
Separately, SWIFT reports that in collaboration with leading global transaction banks, it is developing a proof of concept (PoC) application that will test whether distributed ledger technology (DLT) can be used by banks to improve the reconciliation of their nostro accounts in real time, optimising their global liquidity.
Australia and New Zealand Banking Group, BNP Paribas, BNY Mellon, DBS Bank, RBC Royal Bank and Wells Fargo are among the banks participating in the PoC. These banks are working with SWIFT to identify the challenges, define the specifications, build the application and ultimately test the concept. An additional 20 banks will join the programme at a later stage to further validate and test the DLT concept. The results of the PoC will be presented at Sibos in Toronto in October.