Singapore moved a step closer to getting a yuan-clearing bank after issuing full banking licences to two Chinese lenders.
“The Singapore branches of Bank of China and Industrial and Commercial Bank of China have commenced operations as full banks with qualifying full bank privileges with effect from October 5,” said the the Monetary Authority of Singapore.
China, in turn, will allow one of the two banks to become a clearing bank for yuan transactions.
Having a yuan-clearing bank will let Singapore compete more aggressively with Hong Kong in the growing market for yuan-denominated trades and financial products.
“Implementation details on the RMB clearing bank will be worked out by the relevant agencies in Singapore and China in due course,” the Singapore central bank added.
“I expect a clearing bank to be set up (in Singapore) before the end of the year,” said Woon Khien Chia, head of local markets strategy of emerging Asia at Royal Bank of Scotland.
China has to date appointed yuan-clearing banks for Hong Kong and Taiwan, allowing companies in these two places to convert various currencies into yuan as well as offer yuan-denominated loans.
The entry of the two Chinese lenders in Singapore will present more competition in an already crowded retail space where the city-state’s three banking groups DBS, Oversea-Chinese Banking Corp and United Overseas Bank are the market leaders.
A qualifying full bank licence allows recipients to open as many as 25 branches and offer services that include accepting retail deposits.
The three Singapore lenders will, however, get more scope to expand their China operations as part of the deal between Singapore and China in July.
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