A corner of the City of London. [Photo/Xinhua]

London's new renminbi clearing facility will make it easier for businesses and investors to use the Chinese currency, and it will also support the city's role as an offshore yuan center, said Michael Vrontamitis, head of product management at the transaction banking unit of Standard Chartered Plc.

The benefits of the facility include same-day clearing for London transactions, the ability to clear transactions without being affected by Chinese public holidays and clearing under the laws of the United Kingdom.

The facility is being jointly established by Standard Chartered and Agricultural Bank of China Ltd. It was announced last week during Prime Minister David Cameron's visit to China.

There had been much speculation in London's financial sector about the possibility that the People's Bank of China (the central bank) would appoint an official clearing bank in London. But Standard Chartered and ABC took the initiative to establish a market-led solution.

The big London client bases of the two banks "will facilitate a seamless transfer of renminbi," said Vrontamitis in an interview with China Daily.

"I think fundamentally, the services we can provide are equivalent to the services that an official clearing bank appointed by the PBOC would have provided," he said.

In some offshore centers, the PBOC appoints an official clearing bank and helps that bank carry out the clearing function. That's the case in Hong Kong, for example, where Bank of China Ltd's unit fulfills that role.

But in other markets, clearing services are established by the banks offering the services.

One example is the Industrial and Commercial Bank of China Ltd, which offers renminbi clearing services in Singapore. Vrontamitis said it represents a model similar to the Standard Chartered-ABC platform in London.

Before the clearing system was established, London's renminbi transactions had to be cleared through other offshore renminbi centers, such as Hong Kong and Singapore. But that meant transactions occurring in the late afternoon in London had to wait until the next day to go through the Asian platforms.

The Standard Chartered- ABC will operates from 2 a.m. to 5 p.m. London time, so all transactions can be cleared on the same day, said Vrontamitis.

During long holidays in China during the Lunar New Year and "Golden Week" in October, transactions in London can still be cleared on the new platform, said Vrontamitis.

Banks in London that have clients requiring renminbi-clearing services previously had to set up accounts within Asian jurisdictions to facilitate this clearing. They can now avoid this process and use the new platform, he said. The platform is open to clients of other banks as well, he noted.

London's drive to become an offshore renminbi center started in September 2011, when Wang Qishan, who was China's vice-premier at the time, welcomed private sector-led initiatives in developing a center during his meeting with Chancellor of the Exchequer George Osborne.

Since then, London's banks and other financial institutions have worked to launch new renminbi-denominated products and services, and renminbi liquidity in London has gradually increased.

According to the City of London, import and export renminbi financing totaled 33.6 billion yuan ($5.5 billion) in 2012, up 100 percent from 2011, and the value of letters of credit and other loan guarantees grew 13 times to 4.7 billion yuan.

Vrontamitis said he believes the next step for London to grow as a global offshore renminbi center is to further increase renminbi liquidity, and the new clearing facility will help with that process.

He said the clearing service will also raise the awareness and the development of more renminbi-related products and services in areas such as trade finance, global cash management, asset management and bond settlement.

Zhang Yun, president of ABC, said ABC and Standard Chartered will provide comprehensive trade, investment and financing services to market players in London, and they will support Chinese companies operating in the UK.