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UPDATE 1-Frankfurt becomes Europe's first renminbi payment hub
March 28, 2014 / 4:41 PM / 4 years ago

UPDATE 1-Frankfurt becomes Europe's first renminbi payment hub

* German, Chinese central banks sign MoU for renminbi payments

* Deutsche Boerse, Bank of China to develop infrastructure

* Bank of China becomes Deutsche Boerse’s clearing partner

* Deal will ease access to capital markets for both regions

* UK seen signing clearing deal with China next week (Adds comments from Deutsche Boerse)

FRANKFURT, March 28 (Reuters) - The central banks of Germany and China signed an agreement on Friday to facilitate transactions in the Chinese currency in Frankfurt, the Bundesbank said, making Germany’s financial capital the first hub for such payments in Europe.

The Bundesbank and the People’s Bank of China signed a memorandum of understanding during Chinese President Xi Jinping’s state visit to Germany on Friday, ahead of a similar agreement between China and Britain expected on Monday.

“This will make it much easier for the German real economy to clear and settle payments denominated in renminbi, marking a major step forward in intensifying Germany’s economic relations with China,” Bundesbank board member Carl-Ludwig Thiele said.

The agreement will make it easier for investors and companies in Europe and China to issue and own bonds, shares and funds and to pay bills or list companies in each other’s regions.

Up to now, transactions in China’s currency, the renminbi or yuan, have been impractical for all but very large European companies that are able to involve China’s central bank in a deal, because the renminbi is not freely convertible.

The two central banks agreed to cooperate more closely in clearing and settlement arrangements of renminbi payments, and they laid the groundwork to establish a clearing bank.

In a separate statement, German stock market operator Deutsche Boerse said it extended its cooperation with Bank of China to develop the financial infrastructure for the deal and to support the renminbi’s internationalization by promoting Frankfurt as the European offshore centre for the currency. (Reporting by Alexander Huebner and Jonathan Gould; Writing by Harro ten Wolde and Eva Taylor; Editing by Alison Williams and Hugh Lawson)

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