On Nov. 28, the Interbank Market Clearing House Co., Ltd. was formally set up in Shanghai. The Interbank Market Clearing House Co., Ltd., registered as Shanghai Clearing House and approved by the Ministry of Finance and the People´s Bank of China (PBC), was jointly launched by the China Foreign Exchange Trade System, China Government Securities Depository Trust & Clearing Co., Ltd., China Banknote Printing and Minting Corp. and China Gold Coin Inc. With a registered capital of RMB300 million, it is a specialized and independent clearing institution, mainly providing direct and indirect RMB and foreign currency clearing services for financial markets. PBC Governor Zhou Xiaochuan and Deputy Secretary of the CPC Shanghai Municipal Committee, Mayor Han Zheng attended the opening ceremony. They unveiled together the nameplate for the Shanghai Clearing House. The opening ceremony was hosted by Su Ning, PBC Deputy Governor and President of PBC Shanghai Head Office. Tu Guangshao, member of the Standing Committee of the CPC Shanghai Municipal Committee and Vice Mayor, was also present at the ceremony.
In his speech, Zhou Xiaochuan first expressed warm congratulations, on behalf of PBC, for the establishment of the Shanghai Clearing House. He said the interbank market is an important part of China´s financial market system and has played an increasingly important role in macro regulation, fund allocation, price formation and risk management. Its rapid development has given rise to the demand for more efficient and safer clearing services. Since the outbreak of the international financial crisis, countries around the world have reached consensus on the control of financial transaction risks. While reducing counterpart risk and implementing effective oversight are pivotal to the safe and orderly development of OTC derivatives markets, a centralized clearing system can provide most effective technical support. In June 2009, the PBC introduced netting in OTC transactions on the interbank spot foreign exchange market, lowering effectively bilateral credit limits and clearing costs.
Zhou Xiaochuan stressed that improving the efficiency of the financial system and preventing systemic financial risks are the everlasting theme of China´s financial reform and development. They are also the explicit requirement of the central government for the financial sector. Setting up a specialized and independent clearing house is a major step taken by the PBC to implement instructions of the central government, tackle the impact of the international financial crisis, deepen financial market reform, strengthen financial infrastructure building and promote the construction of Shanghai as an international financial center. The establishment of the Shanghai Clearing House makes it possible to offer the interbank market a broad range of centralized clearing services conducted mainly through the central counterparty. This will further increase clearing efficiency, reduce clearing costs and provide technical support for financial product innovation. It will also facilitate the separation of trading, clearing and settlement processes, enhance interbank market transparency and help gather timely the complete information on market transactions and participants´ risk exposures. By so doing, systemic financial risks will be prevented more effectively and the stability of the financial system better maintained.
Zhou Xiaochuan said, as an important intermediary for the interbank market, the Shanghai Clearing House should fully apply the Scientific Outlook on Development and foster not only a consciousness of the overall situation but also service consciousness and risk awareness. It should take as its objective the building of a specialized clearing institution that is regulated, market-oriented and internationalized, so as to satisfy the diversified and ever-increasing needs of market participants. Regulations should be established and perfected to further strengthen risk management and maintain the safe, efficient and stable operation of the clearing system. A corporate governance structure should be set up and improved in strict compliance with requirements laid down in the Company Law and standards of the modern corporate system. Emphasis should also be placed on the building of a professional team so as to upgrade centralized clearing services offered to interbank market participants.
Han Zheng opened up his speech by extending congratulations on the establishment of the Shanghai Clearing House on behalf of the CPC Shanghai Municipal Committee and the Shanghai Municipal Government. He said the State Council Document No. 19 was issued in April of this year to promote the construction of Shanghai as an international financial and shipping hub. It clearly set down that unified and efficient modern financial support systems for market trades, such as those of registration, custody, clearing and settlement, should be further improved and that the efficiency and service capability of Shanghai´s financial markets should be enhanced. Setting up the Shanghai Clearing House is an important step taken to implement Document No. 19 of the State Council. It reflects adequately that relevant departments of the central government have attached great importance and given strong support to the construction of Shanghai as an international financial center.
Han Zheng said the Shanghai Clearing House is a specialized clearing institution for financial trades. The establishment of such an important functional institution in Shanghai, corresponding to the strategic needs of the future development of China´s financial markets, has filled up the gap in the building of Shanghai´s financial market system. It will also help reinforce the clustering and radiation capacity of Shanghai as an international financial center and contribute to the stable and sound development of China´s financial markets. Shanghai will take advantage of this opportunity to intensify financial market infrastructure building, improve financial ecoenvironment, provide all-round support for different financial entities and make new achievements in the construction of Shanghai as an international financial center. This job cannot be done without support and assistance from relevant government departments and various social circles. He hoped that people keep up their support for Shanghai´s "four center" construction and make joint efforts to enhance the international competitiveness of China´s economy and finance.
Present at the opening ceremony were responsible officials from the Ministry of Finance, PBC, CBRC, CSRC, CIRC, SAFE and relevant departments of the Shanghai Municipal Government. Also present were representatives of policy banks, state holding commercial banks, foreign-funded banks, domestic securities and futures exchanges, major domestic enterprises concerned and shareholders of the Shanghai Clearing House. Other participants included representatives of clearing institutions abroad such as Deutsche Boerse, LCH.Clearnet, Euroclear Bank and CLS Group. At the ceremony, Chairman and General Manager of the Shanghai Clearing House Xu Zhen and Deutsche Boerse Deputy CEO Andreas Preuss signed a cooperative agreement. After the opening ceremony, Su Ning and Tu Guangshao attended the inauguration of the Shanghai Clearing House.
