China is looking to expand its cross-border renminbi (Rmb) payments system, after entering into an agreement with Swift.
Executives of the Cross-Border Inter-Bank Payments System (CIPS) and Swift signed a memorandum of understanding (MOU) which will see the pair collaborate and allow CIPS to connect to the Swift network internationally.
CIPS is a government-launched payments system which was initially billed as a rival to Swift, a collaborative messaging system used by most of the global financial sector. CIPS allows banks to clear cross-border payments without using an offshore Rmb centre. It sends payment orders which are subsequently received and settled by correspondent accounts at the counterparty bank.
It was launched in October 2015 with 19 banks signed on. Nine of these were foreign banks, but many financial institutions complained about the obtrusively high cost of the technology required to join CIPS. Membership is mainly composed of those banks that have high amounts of cross-border trade in Rmb.
Additional banks have joined up since, with Russia’s VTB signing on at the beginning of March. Non-members are still able to transfer Rmb cross-border by using a clearing bank.
The executive director for CIPS, Li Wei, says: “CIPS is looking forward to benefiting from Swift’s platform and services to provide an efficient and convenient channel to the global financial community. We aim to provide an inclusive platform to capture cross-border Rmb flows to all types of participants which will significantly extend the reach of Rmb internationalisation.”
Swift’s CEO for Asia Pacific and Emea, Alain Raes, adds: “Swift is a global messaging provider supporting more than 150 payment and settlement systems, and CIPS is a payment system. There are natural synergies between global financial messaging services, such those provided by Swift, and payment systems. Working with such market infrastructures is at the heart of our business.”