The Bank of England (BoE) and the People’s Bank of China (PBoC) have agreed to sign a Memorandum of Understanding (MoU) on renminbi (RMB) clearing and settlement in London.

The MoU will be signed in London on 31 March 2014 and will set out the cooperation between the Bank and PBoC relating to the operations of the RMB clearing and settlement service in London.

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This decision further strengthens London’s position as the Western centre of renminbi trading. According to SWIFT data, 62% of RMB payments outside of China take place in London, and London asset managers are the only ones in the West able to invest directly in Chinese stocks and shares inRMB.

The highly sought-after RMB bond issued by the International Finance Corporation in London earlier this month was the first benchmark bond by an international financial institution, and demonstrated the interest from international investors in London’s RMB markets.

Prime Minister David Cameron and president Xi discussed the co-operation between the two banks in a bilateral meeting in the margins of the Nuclear Security Summit in the Netherlands on 25 March 2014.

The UK was the first G7 country to agree a RMB swap line with the PBoC, and the agreement on clearing and settlement arrangements, the first outside Asia, is the logical next step to giving the international market in London the confidence to expand their RMB activities.

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A London clearing bank would complement the main clearing and settlement infrastructure in Hong Kong by supporting efficient transfer of funds within the Western time zone.