12 September 2013

New Research Papers – RMB and Common Language

Work has now been completed on two of the SWIFT Institute’s initial research grants, and both working papers are available for download.

  • The Internationalisation of the RMB: New Starts, Jumps and Tipping Points
  • The Prospects for Common Language in Wholesale Financial Markets

Both working papers are being presented at Sibos Dubai this month.

The Internationalisation of the RMB: New Starts, Jumps and Tipping Points

Jonathan A. Batten – Department of Banking and Finance, Monash University
Peter G. Szilagyi – Judge Business School, University of Cambridge

We investigate the process of currency internationalisation by determining the pace of internationalisation of the Chinese Renminbi (RMB). In contrast to other published work that relies upon international banking, trade and currency statistics, we utilise aggregated cross-border data provided by the Society for Worldwide Interbank Financial Telecommunications (SWIFT). This data allows better measurement of the role played by a currency in international trade and capital account settlement.

RMB transactions in these areas have expanded significantly in recent years, although they remain concentrated in the financial centres of Hong Kong, Macau, Singapore and Taipei, where language and culture offer clear advantages. Recent RMB cross-border activity in London and New York shows that there is the potential to shift activity beyond the Asia-Pacific region, although the limited scope of RMB transactions highlights the underdevelopment of China’s domestic financial markets and the limited nature of cross-border transactions outside trade settlement and foreign exchange trading.

Our analysis shows that the footprint of Chinese corporations in international markets has at times been significant, with the size of these transactions prompting many to reassess the likely pace of RMB internationalisation. However, on-balance China’s path to RMB internationalisation remains slow and runs the risk of failing to fully capitalise upon the opportunities that are now unfolding as the international economic and political landscape shifts more towards its favour.

Download the paper here.

The Prospects for Common Financial Language in Wholesale Financial Services

Malcolm Chisholm – AskGet Consulting
Alistair Milne – School of Business and Economics, Loughborough University

This paper examines the idea of a common financial language (CFL) from both conceptual and practical perspectives. There can be no single CFL because there is no single underlying and unchanging financial reality. Potential efficiency and risk-management benefits from developing greater CFL for data management are large; but in practice CFL must be confined to a limited number of shared concepts, with fuller agreement on definitions and relationships for use by particular ‘communities of interest’ within firms and in specific operational processes. CFL will be a process of gradual evolution and adoption, not a once and for all linguistic revolution.

Download the paper here.

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