[ZURICH] Switzerland's central bank said Wednesday it had signed a pact with the People's Bank of China (PBOC) to set up clearing arrangements for renminbi trading in a move hailed by the domestic banking lobby.
The Swiss banking sector, facing the end of the secrecy that was once the bedrock of its business, is turning to China as it seeks new markets for the future.
The Swiss National Bank (SNB) said the pact will "promote the use of the renminbi by enterprises and financial institutions in their transactions and help facilitate bilateral trade and investment." The Chinese bank meanwhile also agreed to extend a pilot scheme for foreign investors in Switzerland with a quota of 50 billion renminbi (US$8 billion, 7 billion euros).
The SNB and PBOC had reached a bilateral swap agreement - a currency exchange deal - in July.
The Swiss Association of Bankers hailed the move and the quota saying the latter was "an important prerequisite for Swiss banks to be able to invest directly in renminbi denominated products and to participate in the renminbi capital market." Between October 2010 and February last year, the renminbi climbed from 35th place to seventh place in the list of international currencies used globally for transactions, overtaking even the Swiss franc, the Swiss bankers' association said.