Bank of China, the mainland's largest foreign exchange bank, will begin today clearing services for cross-border trade in yuan after signing an agreement with Hongkong and Shanghai Banking Corp. The agreement, signed over the weekend, marked another step forward for the yuan trade settlement scheme, which will help make the currency more international. BOC said its Shanghai branch reached an understanding with 11 foreign banks to pave the way for the settlement services. The banks, which have trading in Hong Kong, Macau and Association of Southeast Asian Nations countries, include Standard Chartered, Bank of East Asia, Wing Hang Bank, Maybank in Malaysia, Bangkok Bank, and Industrial and Commercial Bank of China. The Hong Kong branches of Bank of Tokyo-Mitsubishi UFJ, Mizuho Corporate Bank, Indonesia-based Mandiri Bank, South Korea's Hana Bank and Singapore's OCBC Bank are also allowed settlement services. The understanding followed the announcement of yuan trade settlement rules by the People's Bank of China that became effective on Friday. BOC's Hong Kong branch was mandated as the sole clearing bank in the city to handle cross-border yuan trade with Shanghai, Shenzhen, Guangzhou, Dongguan and Zhuhai. Its responsibilities include remittance services, collecting export and import bills, issuing letters of credit, financing export and import invoices, as well as packaging import loans. Some brokers and exporters said the rules were so stringent that they doubted many companies could make use of the settlement services. They said some rules limited the scope of services. For example, the duration for clearing trade finance yuan-loans to foreign banks was capped to one month, compared with a lending period of two to three months normally. Settlement banks in Hong Kong and Macau are allowed to borrow yuan in the mainland's interbank market for funding purposes, but the amount is limited to a maximum of 8 per cent of their total yuan deposits as at the end of last year. And the lending period of these loans must not exceed three months. The central bank rules also restrict the amount of lending to foreign banks for settling yuan trade by limiting the financing amount by mainland lenders to a maximum of 1 per cent of their total yuan deposits as of the end of last year.