Deutsche becomes Europe’s first non-Chinese RMB clearing bank

Deutsche Bank has become the first non-Chinese bank in Europe authorised to act as a renminbi clearing bank, expanding the infrastructure available to companies settling trade and investment flows between China and Europe.

The People’s Bank of China approved the German lender to provide RMB clearing services from Frankfurt on 10 August. Deutsche said the appointment would support trade, treasury and investment activity along major China-Europe corridors.

The distinction is important. Frankfurt has had an RMB clearing bank since 2014, when the PBoC appointed Bank of China’s Frankfurt branch. Deutsche is therefore not the first RMB clearing bank in Germany, but it is the first non-Chinese institution in Europe to receive the status.

Clearing-bank status creates a more direct route into China’s domestic RMB payment and liquidity infrastructure. When the Frankfurt framework was established, the Bundesbank said direct local clearing could remove the cost of routing payments through other financial centres and give the designated institution access to onshore RMB liquidity and China’s payment system.

For European companies trading with China, the commercial relevance extends beyond foreign exchange.

Deutsche Bank China president Leo Yin said European businesses could use the service to reduce currency friction and streamline supply-chain payments, while Chinese companies could finance European investment and trade while remaining within the RMB ecosystem.

That creates another option for importers and exporters considering whether invoices, supplier payments and financing should remain denominated in dollars or euros or move into RMB. Direct RMB settlement can also reduce the number of intermediaries involved in payment flows, although the economics will continue to depend on liquidity, pricing and each company’s currency exposures.

Deutsche already has extensive access to China’s payments infrastructure. Deutsche Bank China was among the original 19 direct participants when the Cross-Border Interbank Payment System, CIPS, began operating in October 2015. The PBoC designed CIPS to shorten clearing routes and support cross-border trade, investment and financing in RMB.

The new mandate gives Frankfurt a second institutional route into that infrastructure and widens the choice available to European corporates at a time when China is encouraging greater use of its currency in international trade and financing.