You say CNH, I say CNY…

Publication date: 20 May 2011
Author: Eleanor Hill, Editor, FX-MM

Tagged with: Bank of China, CNH, CNY, IMF, Mobile technology, Payments, SWIFT London Business Forum

The rise of the Renminbi as a global currency was just one of the topics of debate at SWIFT’s London Business Forum (LBF) yesterday. Bringing together over 425 delegates from banks, corporates, technology providers and industry bodies, the LBF kicked off with a session on London’s future as the leading international financial centre.

Under the guidance of The Economist’s Philip Coggan, the panel discussed everything from the impact of Basel III to the relocation of headquarters from London to popular financial centres in the East. On the topic of regulation, and whether London should be able to add its own spin or indeed drive regulation, Graham Bishop of grahambishop.com was keen to support the notion of regulation channelled through Europe to its member states, citing the roll out of accounting standards as an example of where Europe had gotten it right. However, David Lascelles of independent think tank CSFI countered with concerns over loss of local initiative and control.

One area where the panel was largely in agreement though was that the taxation environment in the UK was becoming challenging for retaining talent. Ann Cairns of Alvarez & Marsal Europe welcomed the cut in corporation tax but felt that the 50% top rate tax was not conducive to keeping key employees in London. Chris Cummings of TheCityUK felt that it was also important to build an environment that was appropriate not just for today’s executives but also to ensure that ‘tomorrow’s leaders’ remained in the UK.

And as the contest for IMF leadership hots up, the question of succession management is surely more pertinent than ever. We are all well aware of the risks surrounding systemic institutions, but what about systemic individuals?

A session on SWIFT’s 2015 strategy followed, focusing largely on enhancing interoperability as well as a few of SWIFT’s latest initiatives and plans such as 3SKey (a multi-network personal digital identity solution for corporates and banks). The ensuing stream on the payments landscape also looked at new initiatives and innovation, touching on UK Faster Payments, the decline in cheque usage and the growth of mobile payments, with SEPA for mobile even getting a mention. When asked whether the banks would be disintermediated by the telecoms companies in the mobile payments space, J.P Morgan’s Colette Selfslagh stressed the importance of relationships, not just transactions, as well as the role of credit reciprocity.

The payments panel was also quizzed as to whether – or when – we would see the term ‘value date’ replaced by ‘value time’. Both Barclays Corporate’s Mark Davies and Kevin Brown of RBS felt that there was much infrastructure work to be undertaken before this could happen – in particular with central bank operating hours only covering five days a week. Brown also questioned whether all payments actually needed to be real-time.

Professor Michael Mainelli, Executive Chairman of Z/Yen Group picked up this theme of the ‘now’ culture after lunch with his presentation on Long Finance: Financial Centres and Transactions across Generations. A great session – but one you very much had to be there for!

‘What do corporates want from their banks?’ was the theme of the penultimate session, which featured Guy Ingram of SAB Miller and Darsh Johal of Shell. Both corporates cited a need for banks to better understand their business requirements and to present tailored solutions to the problems that they were facing. While Ingram felt that a focus on getting the basics right was the key to his bank requirements, Johal was very much in search of best-in-class solutions and investing for the future. What both the corporates and consultant Gary Wright were keen to see from the banks though was more corporate involvement in bank innovation at an early stage, meaning that products should be road-tested at every stage, rather than just before launch.

Elsewhere, the theme of collaboration (perhaps the most-used word of the day) was raised. While collaboration has been a key buzzword for the banks of late, it seemed that the corporates were not overly concerned either way, as long as they received the services they needed at the right price. The key message for the banks here then was to make it as easy as possible for their customers to do business with them.

Interestingly the session also gave a few pointers to SWIFT as the ease of using SWIFT for corporates was brought into question and Johal asked why there were no corporates in SWIFT’s Corporate Access Group. A space to watch no doubt.

Finally, Stephen Chan of the Bank of China gave a very informative presentation on Cross-Border Renminbi Trade Settlement, a topic which has been dominating the financial press of late. Mr Chan explained the processes and steps which the Chinese government has taken to open up the Renminbi to the rest of the world, whilst ensuring a careful pace of development for the country. According to Chan, 95% of China’s trade can now be conducted in RMB, although the currency is still not fully convertible. Hong Kong is the test centre for offshore RMB at present but there was talk of Singapore being one of the next centres to come into play.

And as for the title of this post – the meaning of CNH vs CNY was apparently the most frequently asked question during Bank of China’s recent meetings. So, to put you out of your misery (if you were wondering), CNH is used to denote offshore RMB, whereas CNY is its onshore counterpart. CNH is not yet an official ISO code however.

NB. FX-MM looks at RMB bonds issued in Hong Kong, so-called ‘dim sum’ bonds, in the June/July edition.

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