StanChart sees strong growth in yuan banking products, services

PUBLISHED : Wednesday, 23 March, 2011, 12:00am
UPDATED : Wednesday, 23 March, 2011, 12:00am

Standard Chartered Bank anticipates strong demand for yuan banking products and services in the coming years as the currency gets more use in cross-border and international trade settlements.

At a round table yesterday, Neil Daswani, Standard Chartered's managing director of transaction banking, North Asia, forecast China's trade to reach US$5.9 trillion by 2015 and US$1 trillion of that will be settled in yuan. The bank sees China trade reaching US$3.9 trillion this year, with US$200 billion of that settled in yuan.

It expects yuan deposits in Hong Kong to grow from 653 billion yuan (HK$774.29 billion) now to 4.496 trillion yuan in 2015. Daswani said strong demand growth for yuan and its internationalisation would translate into demand for banking services.

George Nast, global head of product management in transaction banking, said similar patterns were evident in emerging markets, with local currency increasingly used in trade settlement as intra-regional trade continues to grow.

'It will lead to demand for banking services in all sorts of interesting currencies,' Nast said. 'The complexity of dealing in emerging markets is still going to be there - it is not as simple as dealing in dollars.'

He expected banks would need to set up treasury centres in emerging markets to handle the more localised transactions and settlements, outside the traditional capital market hubs like London or New York. The ability to manoeuvre the technicalities and investment risks in managing accounts in different regional currencies, he said, would be the key to whether banks would generate more business.

'It is a big stretch to take what you are doing in the US and Europe into Asia,' said Karen Fawcett, senior managing director and group head of transaction banking at Standard Chartered. 'I think a big step is whether they are willing to take local corporate risks in the emerging markets. It is very easy to go into Singapore and Hong Kong ... It is very easy to understand and operate in those environments.

'But as soon as you get into ... the supply chains in Vietnam, Indonesia, India, or in second- and third-tier cities in China, it becomes more difficult ... The real test will be how many [banks] will go into providing end-to-end service for the [entire] supply chain.'

In currency

Standard Chartered expects China's trade to hit US$5.9 trillion by 2015, with this much, in US dollars, settled in yuan: $1tr