A memorandum of understanding (MoU) establishing the first renminbi (Rmb) trading hub in the Americas has been agreed between the governments of Canada and China.

Toronto will reportedly become the designated new hub and Industrial & Commercial Bank of China (ICBC) the designated Rmb clearing bank, in an agreement signed between the Bank of Canada and People’s Bank of China this week.

The agreement also brings into force a three-year reciprocal currency swap deal, the maximum value of which will be Rmb200bn, or C$30bn.

Signed respectively between the governors of both central banks, Stephen Poloz and Zhou Xiaochuan, the MoU establishes a commitment from both countries to regularly communicate over the conduct of Rmb business and Rmb liquidity conditions in Canada.

A spokesperson for the Bank of Canada tells GTR in a statement that the Canadian government led the initiative, which also enables China to provide liquidity support in Canadian dollars in China.

The spokesperson tells GTR that the size of the Canadian currency swap deal remains broadly in line with the size of similar currency swap deals made between China and other developed western economies such as the UK and Australia.

“The Bank of Canada has an interest in [Rmb] clearing and settlement arrangements in Canada from a financial system perspective,” reads the statement. “To provide liquidity in a foreign currency for the purposes of financial system stability, a central bank receives foreign currency in exchange for domestic currency and then lends the foreign currency to domestic institutions.”