New Income
An RMB clearing bank has officially opened in the Euljiro district of Seoul. The Bank of Communications of China held its opening ceremony on Nov. 6, attended by Bank of Korea Governor Lee Ju-yeol, Bank of Communications Chairman Niu Siming, and many others.
The clearing bank is going to be responsible for Korean companies’ yuan-based settlements in transactions with China. Before its opening, they had to go through a Korean bank, then a commercial bank in Hong Kong, a clearing bank in Hong Kong, and finally the China National Advanced Payment System (CNAPS) of the People's Bank of China for yuan-based payments and collections. However, the procedure is now simplified to three steps including a Korean bank, the Bank of Communications, and CNAPS, which means they can save fees and avoid financial risks.
At the same time, the clearing bank is supposed to fulfill the function of an off-shore branch of the People's Bank of China supplying short-term yuan liquidity.
When yuan-based transactions take place in Korea, a temporary liquidity shortage could follow. In this case, the clearing bank provides short-term loans for commercial banks and securities companies in Korea, the Korea Securities Depository, etc.