HSBC Bank and Wells Fargo’s blockchain-based solution used for bilateral FX settlements is expanding to include the offshore Yuan (CNH).
The addition of the offshore Yuan will make it the fifth currency to be settled between the two banks, using a shared settlement ledger that currently encompasses the US dollar, Canadian dollar, British pound sterling and the Euro.
Launched in December last year, HSBC and Wells Fargo’s shared distributed ledger technology (DLT) solution has settled more than $200 billion in transactions, with plans for additional currencies to be added in the next few months.
“Extending CNH PvP settlement to Wells Fargo is an important milestone for reducing Herstatt Risk outside G10 currencies,” said Mark Williamson, global head of FX partnerships and propositions at HSBC.
“This development is only our first step in extending our coverage into Emerging Markets currencies.”
Joint operations teams at HSBC and Wells Fargo manage the shared, private ledger, with total visibility by each of the parties to the relevant FX settlement, alongside shared FX transaction records.
A framework of an agreed rulebook governs the platform and facilitates efficient netting and settlement of FX transactions between HSBC and Wells Fargo in EUR, GBP, CAD, USD and now CNH. The two banks stated that participants in the network are only privy to transactions to which they are a counterparty.
“We are pleased to expand the capabilities of the platform to include CNH, allowing us to reduce risk in the payment settlement process,” said Vince Hindman, global head of rates and FX solutions at Wells Fargo Corporate & Investment Bank.
“The collaboration shows that we can pursue innovative technologies and apply them in a way that enhances our existing infrastructure and ultimately benefits our clients.”