Clearstream Enables Landmark Use of Offshore Chinese Government Bonds for Initial Margin Segregation

Clearstream, Deutsche Börse Group’s post-trade business, has opened up new possibilities for international investors to use offshore Chinese government bonds as collateral. The company supported Crédit Agricole CIB, CITIC Securities Company Limited, and Shanghai Pudong Development Bank in becoming the first group of institutions to use offshore Chinese government bonds for initial margin segregation. 

China’s vast bond market, the second largest in the world at US$ 26 trillion in volume outstanding, is becoming increasingly accessible to international investors. This has been facilitated through initiatives like Bond Connect, a cross-border investment program that links the Mainland China and Hong Kong bond markets, and the opening of China’s interbank repo market to qualified foreign institutions. As Chinese collateral becomes more mobile, it will be critical that market participants holding this collateral outside of China can use it efficiently within the established infrastructure of global capital markets, including for initial margin segregation.

“Connecting global markets has always sat at the heart of Clearstream’s strategy, and this pioneering step, taken in partnership with Crédit Agricole CIB, CITIC Securities Company Limited and Shanghai Pudong Development Bank, is a testament to that,” said Philip Brown, CEO at Clearstream Banking S.A. “At Clearstream, a key purpose is to provide the market with innovative solutions embedded within a deeply trusted environment. With this effort, we do just that; providing the reliable framework that allows clients to confidently integrate Chinese collateral into their global strategies, translating a historic market development into a tangible opportunity for greater capital efficiency.”

Wendy Zhu, Head of Global Markets Division, Crédit Agricole CIB China, added:
“As a forerunner in facilitating the internationalization of Chinese sovereign bonds, Crédit Agricole CIB is among the first to embrace multi-currency Chinese sovereign bonds, including CNH-denominated government bonds, as eligible collateral for derivatives margin. This step helps establish a practical model for expanding the international application of Chinese bonds.”

Zhang Huizi, Head of CITIC Securities International FICC, added: “The inclusion of offshore Chinese government bonds in internationally eligible collateral is a pivotal step in raising the international recognition of Chinese bonds. This not only broadens their application scenarios in the global market but also optimizes the efficiency of asset allocation and margin management. CITIC Securities will continue to facilitate the integration of Chinese assets into the global financial system and advance the internationalization of the Renminbi.”

Xue Hongli, SPDB Chief Financial Markets Business Officer, Shanghai Pudong Development Bank Chief Economist, Executive President of SPDB Research Institute, added: “Shanghai Pudong Development Bank is one of the first domestic banks to enhance the acceptance of Chinese government bonds as initial margin in cross-border OTC derivatives transactions. With the growing acceptance of offshore Chinese government bonds, foreign institutions are gradually viewing them as global safe assets. Looking ahead, SPDB will continue strengthening its cooperation with ICSDs, CSDs, and foreign counterparties to advance the global acceptance of onshore RMB Chinese government bonds as eligible collateral.”

In many jurisdictions, initial margin segregation is a key regulatory requirement for collateral posted upfront to cover over-the-counter (OTC) derivatives transactions. Clearstream offers initial margining services for both cleared and uncleared OTC derivatives from a single collateral pool, enabling clients to hold multiple currencies and asset classes in a single location.

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[Editorial note: Please find here a high-resolution photo of Philip Brown.]

About Clearstream

Clearstream is the innovative and trusted post-trade business for the global markets. It runs the leading securities and funds servicing ecosystems of tomorrow.

The company operates the German and Luxembourg central securities depositories and an international central securities depository for the Eurobonds market. With 21 trillion Euros in assets under custody, it is one of the world’s largest settlement and custody firms for domestic and international securities.

It also delivers premier fund dealing, distribution, digital and data services, covering over 55 fund markets worldwide.

Clearstream is part of Deutsche Börse Group, an international exchange organization and provider of innovative market infrastructures.
To learn more, visit us at www.clearstream.com or connect via LinkedIn.