The BRICS Post | June 2, 2014
The UK government has agreed to establish a yuan-clearing bank in London that would “act as a signal for London’s growing yuan activities”.
Mark Boleat, policy chairman for the City of London Corp said consultations were ongoing for a long time with the People’s Bank of China, Bank of England and many banks in London, and the PBOC has now decided to appoint the clearing bank.
“We assume it’s going to be a Chinese bank, because that’s the way the PBOC does things,” Boleat said in an interview to a Chinese daily in London.
China and the UK had signed an agreement last year to establish a reciprocal 3-year sterling/renminbi (RMB, or Chinese yuan) currency swap line.
UK Chancellor of the Exchequer George Osborne had said earlier this year that a clearing bank was the next logical step to take in building trade ties with China.
“It would be an important further milestone both in the development of the renminbi as a currency of the world’s economic future, but also of London and the U.K. as the western center for renminbi trading,” said Osborne.
China has also signed an agreement with Germany to work on appointing a clearing bank in Frankfurt.
Meanwhile, the UK administration would also allow Chinese banks to open new branches in the country soon.
Previously, Chinese banks, as well as many other international banks, were only allowed to set up subsidiaries, which are subject to the strict capital requirements that apply to Britain’s local banks, hence the lending and financing capacity is proportional to the balance sheet of the subsidiary.