RMB: Banks staff up to match rise of Chinese currency
The need of banks to raise awareness and staffing levels around the renminbi within their own organizations looks set to be key as the battle for business heats up.
Banks have been ramping up their capabilities in RMB for some time in preparation for what is seen as a lucrative future in the currency across a number of business areas.
RMB is now one of the world’s top five global payments currencies, which means the time and effort dedicated to RMB in areas such as foreign-exchange trading, payments and trade finance must rise as China gradually moves down the path to full convertibility.
“At our bank, we have people in Asia and Europe dedicated to RMB promotion and operations,” says Julien Martin, head of RMB competence centre at BNP Paribas, one of the banks building its presence in the RMB business. “These teams are looking at the overall strategy.
“We have people dedicated to RMB in our cash management, transaction banking and FX units, as well as in the back office processing payments. We also have dedicated RMB sales and trading people for RMB in Hong Kong, Shanghai, London and New York, plus people on the asset-management side, custody and clearing and settlement.”
The recent announcement by payments company Swift that the RMB has entered the top five of world payments currencies, overtaking the Canadian and Australian dollars, has bolstered the belief inside banks of the future importance of the currency, and poses the question of how long it will be before it catches up with the leading pack of the Japanese yen, British pound, euro and US dollar.
“The RMB is going to overtake the yen soon as a payment currency,” continues Martin. “We are making good achievements on this business. If you look at 2014 compared with 2013, our volumes have doubled in commercial and institutional payments. It gives you an idea of how happy we are with this.”
HSBC is another bank that has been pushing awareness of RMB.
“In terms of our business, we can see from the volumes in FX that the market is gaining momentum,” says David Pavitt, managing director, head of EM FX trading London and head of RMB business development for markets EMEA, HSBC, who highlights that the average monthly volume in 2014 was twice that of 2013.
“In RMB FX, I have one person doing this at present, but it’s really a two-man job.”
As these volumes of RMB continue to grow within both banks and corporations, the demand for different types of banking services is set to grow with it, with new priorities emerging for the coming year.
“The next big story is the cross-border cash pooling,” continues Pavitt. “We have dedicated people to look after this in our payments and cash management business. For corporates, it was previously difficult to pool cash in RMB, but they can now pool it where they want and in one place.
“Settlement of trade for imports-exports is a fairly well-established business, but the potential of what you can do with cash pooling is still to be discovered. Along with loans, this will be the story for us over the next year.”
Standard Chartered’s historical emerging-market focus arguably makes the rise of the RMB more of a key factor for it than banks with a wider global outlook.
Chris Allington, global head of FX at Standard Chartered, says that in terms of the bank’s financial markets business, well over 50% of its people touch RMB in some way or another.
“For Standard Chartered, RMB is the primary currency we are focused on,” says Allington. “It’s in our DNA, and integral to our business and value proposition. We are focused on it from the transaction-banking side with regards to payments and we are seeing an ever increasing focus on FX, rates and credit products.
“There’s no doubt that there’s no bigger prize and opportunity for Standard Chartered than to continue to be a market leader in RMB. Along with a small number of banks, SCB is ideally placed to grow its RMB franchise, being a relevant onshore player and a dominant international player in RMB.”
He adds: “It’s only really the people that can join the dots between the local and the international who are in prime position to capture the opportunity.”
While it is clear banks appear to be employing an increasing number of people dedicated to RMB in one way or another, more and more employees are dedicating some part of their role to servicing the Chinese currency.
This battle for RMB dominance is bound to be a long one, and it will no doubt be fought on a number of fronts, but a willingness to make the currency part of a bank’s core strategy seems set to sort the winners from the losers.