Budapest Renminbi Initiative Plenary Meeting RMB Settlement and Clearing Perspectives Session Role of Renminbi Clearing Centers and Banks around the World Central Bank of Hungary Lajos Bartha Director, Financial Infrastructures 1 26 March 2015

Internationalization of RMB Liberalization of Chinese financial markets Cross-border capital flows Internationalization of RMB mainly through offshore RMB centers Magyar Nemzeti Bank 2 Source: CEIC, SWIFT Total value of Chinese foreign trade (billion RMB) Ratio of settlements in RMB (%) Value of Chinese foreign trade and the ratio of RMB

Internationalization reflects in payments Growth in RMB payments between July 2013 and 2014 (SWIFT): UK: 123,6% Germany: 116% France: 43,5% Lux: 41,9% Magyar Nemzeti Bank 3

RMB Clearing arrangements worldwide Magyar Nemzeti Bank 4 Country/City Date of MoU clearing arrangement Clearing bank Date of designation for clearing bank Hong Kong BoC2007 Singapore ICBC Frankfurt BoC London CCB Luxembourg ICBC Paris BoC South Korea BoC Qatar ICBC

Advantages of an official clearing bank’s designation official clearing banks can borrow liquidity from PBOC ensure easier access to Chinese markets presumably faster, cheaper and comfortable payment services for customers receive quotas to the onshore financial markets Magyar Nemzeti Bank 5 Customer / other bank Clearing bank Parent bank in CHN Chinese RTGS

Potential drivers for increasing payment turnover in the CEE region China is a major trading partner: concerning import of goods to Hungary the 4th largest since 2005 Since 2008 constantly growing number of Chinese companies in Hungary (~300), e.g. Wanhua or Huawei Chinese population in Hungary has doubled in the last 15 years and exceeded Increasing Chinese economic activity in the CEE region Magyar Nemzeti Bank 6 Source: Hungarian Statistical Office Trade of goods between China and Hungary

Setting up a clearing arrangement in Hungary in the framework of the Budapest RMB Initiative: two steps Magyar Nemzeti Bank 7 1. Chinese bank provide correspondent banking services, maintain RMB payment accounts for banks and companies official clearing bank designation by the PBOC is necessary for smooth service provision, Hungary would like to become the gate to CEE region MoU between the PBOC and MNB 2. In the long run if the RMB payment turnover reaches a much higher volume, establishment of a clearing system with the possible involvement of the Hungarian ACH (GIRO) owned by MNB (i.e. allowing execution of payment transactions initiated in RMB among account holders within the bank and also carrying out cross-border RMB payments through its parent bank)

Thank you for your attention! Magyar Nemzeti Bank 8