Standard Chartered Bank said the growing number of worldwide clients requiring seamless pricing and information on the Chinese yuan has prompted the adoption of new strategies to deal with what has now become the second most used currency in global trade.

Last month, the yuan surpassed the euro as the second most utilized currency in trade finance after the US dollar, according to the Brussels-based Society for Worldwide Interbank Financial Telecommunication. The yuan accounted for 8.7 percent of global trade finance, the group said.

Moving with the trend, UK-based Standard Chartered and other global banks are seeking to cultivate new business opportunities in areas such as investment and hedging using yuan products.

“We’ve recently launched a global trading desk for the yuan, which allows our clients to effectively transact foreign exchange in multiple time zones, including Shanghai, Hong Kong, London and New York,” Sridhar Kanthadai, managing director and regional head of transaction banking for Standard Chartered in North Asia, told Shanghai Daily in an exclusive interview.

The pound is forecast to become the fourth currency allowed to trade directly with the yuan, following the US dollar, Japanese yen and Australian dollar. The Bank of England and the People’s Bank of China earlier this year signed a three-year currency-swap arrangement worth of 200 billion yuan (US$33 billion) to boost London’s position as an offshore yuan center.

London currently handles 60 percent of the world’s yuan foreign-exchange trade. Settlement in yuan will become available in the London time zone on China’s national holidays, after Standard Chartered joined hands with China’s third-biggest lender, Agricultural Bank of China, to provide yuan clearing services in the UK, the British bank said last week.

“Having that London leg in our global trading team for yuan enables us to provide additional services to our clients,” Kanthadai said. “We are innovatively working on those enhancements.”

Kanthadai, currently based in Hong Kong, is responsible for origination, product development and service delivery for clients across the North Asia region.

He shared his views with Shanghai Daily on the changing global landscape of transaction banking as the Chinese yuan becomes more international.

Q: The Chinese and British governments have agreed to launch direct trading between the yuan and pound. What does that mean for both countries?

A: I think it’s a big step forward for both. London is the largest world foreign-exchange center, but not being able to provide direct trading between the yuan and sterling is not the best situation. As companies expand their trading in yuan, having direct conversion available in the London time zone is very beneficial to them. It’s a welcome step, and we are privileged to be part of that whole process.

Q: Do you think direct trading in London will affect other foreign-exchange centers, like Singapore and Hong Kong?

A: Not really. Each center is evolving its own capabilities to become attractive to clients. I think what’s most important is what these clients want. Having the yuan traded in London, along with Hong Kong and Singapore, effectively helps to expand the capability of using the currency overseas. It really adheres to the long-term plan of the Chinese authorities, which is to make the yuan an international currency.

It benefits our client because it allows them to trade these currencies for needs like investment and savings in the time zone with which they are most familiar. I think it could be a friendly competition for the centers. It’s an important step for not only the financial markets but also for the currency itself.

Q: According to McKinsey, China will have as many large companies, with annual revenue over US$1 billion, as the combined number of large companies in the US and Canada by 2025. What opportunities do you see in this changing landscape?

A: We have seen this trend coming. A number of Chinese companies are becoming not only large in a domestic context but also much more international.

The development of Chinese companies is something we eagerly support. The strength we can bring to our clients when they expand overseas is our global network and our deep knowledge of the markets. In fact, we are already serving a significant number of Chinese companies and we look forward to more opportunities as they expand further. We’ve helped them to develop practices that are consistent with their international objectives.

New objectives come into play when companies grow. Sophisticated practices need to be put in place for a number of different reasons, including efficiency as well as risk management.

The needs of the companies also evolve as they become larger and more sophisticated. We see this as an opportunity for us to take them on a journey that promises them a more prosperous future.

Q: How exactly could a bank like Standard Chartered help Chinese companies become more international and achieve the level of efficiency you are talking about?

A: The scale and complexity of challenges they face in going global increases.

When you move overseas, from a treasury standpoint, do you decentralize your decision-making to have your overseas unit work as a local company, or do you centralize decision-making and associated processes for a much more controlled environment for the company?

There’s no one answer to fit everyone. It’s a question of the maturity, size, the importance of that particular underlying entity and the scale of growth you are looking at. Setting up a unit in Singapore is quite different from setting up one in Europe. What we can bring to the companies is the framework of practices, or the series of steps that they can take to benchmark themselves against other leading companies.

What companies normally look for in expansion is visibility, control and optimization. They want to know what’s going on, to manage what’s going on and to make the best of it. They want to manage risks and optimize liquidity, which are very important to growth. Good treasury practices can enhance that growth. It’s a very important part of the company’s strategy, which is as important as safety and product strategies.

Q: Chinese regulators are getting tougher on corruption and fraud. The central bank has required banks to submit new anti-money laundering plans before year’s end. Does the new requirement have any impact on your current operations in China or in the region?

A: In the past few years, from country to country, regulators are raising the bar on anti-money laundering regulations as well as due diligence checks on customers by financial institutions. It’s called the “know your customer” regulation.

What the Chinese regulator is doing is consistent with the practices we’ve seen in many other jurisdictions. We think it’s the right step for the industry as well as for the financial system to preserve trustworthiness and reliability and minimize some of the impacts of outside influences.

Being an international bank, we have developed global policies, standards and infrastructure to meet the regulatory requirements in every marketplace in which we operate. We feel very confident about our ability to work with Chinese regulators to meet those requirements.