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04/09/2015

Development of offshore RMB business

The world has been eyeing the continuous development of the Chinese renminbi and the ongoing efforts of the PBOC to drive further the internalization of its currency, capturing the headlines of major financial publications as it boldly moves towards an opening of the Chinese currency. Hong Kong and Singapore have traditionally been the major established offshore centres for RMB trade and deposits, and this analysis looks into what is in store for them in the coming years.

Forecasting the evolution of this currency until 2020, we lift the veil on the opportunity that RMB deposits will constitute, who are the players that can reap the biggest benefits and what strategies can be used by financial institutions who wish to be strong contenders in this field.

RMB market analysis and forecast

In the analysis found in the full article (see pdf hereunder) we show that the RMB deposit market will continue to grow strongly in Hong Kong and Singapore: by 2020 they will have grown to represent a third of the Singapore deposits in local currency, and up to half of the deposits in local currency in Hong Kong.

In today's world where regulations force banks to increase their liquidity, this deposit source represents an incredible opportunity for the players who can seize it.

Competitive environment and market share by financial institutions

According to a survey of CFOs and Treasurers of Asia's top 1000 enterprises, the RMB deposits in Hong Kong and Singapore are split in 3 categories: the big 3 banks (Citibank, Standard Chartered and HSBC) holding more than half of the total deposits, and the rest being equally divided between the main Asian Banks (Bank of China, DBS, OCBC, UOB) and the rest of the international.

Today, there is little expectations that those percentages will change, though as the tightening of the liquidity regulations continues, competition in this area will become fierce, particularly as International Banks try to wrestle volume from the top players.

How can banks take part of the RMB growth story?

What are the possible approaches to capture a larger piece of the RMB deposit pie and benefit from the strong growth of this deposit pool?

It is clear that all Asian and international banks in Hong Kong and Singapore are gearing up for the fight over RMB deposits, and are starting to implement some or all of the above.

The race is on, who will be the winners and losers over the coming years? Who will emerge as more agile than the competitors and, who knows, disrupt the status quo?

Download the full article on the development of offshore RMB business here.

 

Sia Partners

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