A wholly owned unit of BOC Hong Kong Holdings Ltd. (02388.HK) is seeking to become the exclusive clearing bank for cross-border stock trading.
Bank of China (Hong Kong) Ltd. is vying for the role which it sees as an opportunity to grow its business in other key areas such as cross-border wealth management, renminbi division head Yang Jiewen said.
The through-train equities trading scheme between the Hong Kong and Shanghai stock exchanges is expected to be launched in October.
The China Securities Depository and Clearing Co. Ltd. (CSDC) is screening applicants for the clearing role that may be given to one or more lenders.
To qualify, an applicant must have assets of at least 5 trillion yuan (US$801.33 billion) and a net asset value of at least 400 billion yuan. It must have branches in Hong Kong and Shanghai and able to provide a credit line to CSDC of at least 20 billion yuan during daytime and 5 billion yuan at night.
The difference in settlement times between the two exchanges could pose short-term funding problems. Bank of China (Hong Kong) could could help raise the efficiency of the mainland clearing agency, Yang said.
Yang said his bank, backed by Bank of China Ltd. (03988.HK), has a competitive advantage in the renminbi exchange and payment business.
Bank of China is a trustee bank for the qualified foreign institutional investor scheme which requires cross-border settlement and clearing arrangements similar to those in the through train stock scheme.
The bank also handles renminbi transactions for Hong Kong Exchanges and Clearing Ltd. (00388.HK).
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