CIPS and RMB payments: where are we now?

On 8th October 2015, the first phase of the Cross-Border Inter-Bank Payment System (CIPS), a major piece of financial market infrastructure for RMB payments, went live. Now, almost one year on, the market is analysing the impact of the changes.

CIPS is a government-launched payments system, which is to be developed in two phases. The system allows banks to clear cross-border payments without using an offshore RMB centre by sending payment orders which are subsequently received and settled by correspondent accounts at the counterparty bank.

The first batch of direct participants joining CIPS comprised of 19 Chinese and foreign banks and 176 indirect participants from 47 countries across six different continents. By March 2016, the number of indirect participants had reached 253 and CIPS signed an MoU with the financial services messaging provider, SWIFT.

According to CIPS executive director Li Wei, the aim of the memorandum was to provide an inclusive platform to capture cross-border RMB flows to all types of participants. While Ersin Dalkali, market development manager for FX Asia Pacific at Thomson Reuters expressed optimism about the ongoing rate of adoption in a recent Euromoney article, stating that:”Following the agreement with SWIFT, the adoption of CIPS should accelerate as the number of direct participants will increase by utilising the SWIFT network to connect directly. This will help CIPS become a mainstream platform for clearing and settling cross-border RMB payments.”

Moreover, following the approval of the second batch of participating banks, PBoC deputy governor, Chen Yulu said the central bank is looking forward to moving on to the second phase of CIPS in order to boost international monetary and financial policy cooperation, without however specifying a release date.

With programmes such as CIPS enabling financial institutions to process and settle RMB payments across borders and with the IMF preparing to introduce the currency to its special drawing board rights later this year, its is clear China is continuing to broaden market access.

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