At present, my country has established the Cross-border Interbank Payment System (CIPS), which is specifically used to handle cross-border payment and settlement of RMB. But before that, there were three ways to achieve cross-border payment and settlement of RMB in the entire market.
Agency Bank Model
This model requires domestic banks with international settlement business capabilities to sign RMB agency settlement agreements with overseas banks, open RMB interbank current accounts for them, and then act as agents for overseas banks to provide cross-border RMB collection, payment, settlement and other services.
For example, the business scenario is that overseas enterprise A and domestic enterprise B conduct transactions, A needs to pay a sum of money to B, and both parties agree that this transaction will be settled in RMB.
The preparatory work includes A opening a settlement account at Citibank overseas, and B opening a settlement account at Agricultural Bank of China in China; Citibank and Bank of China sign a RMB agency settlement agreement, and Bank of China opens a RMB interbank current account for Citibank; Citibank and Bank of China are connected through SWIFT. Bank of China and Agricultural Bank of China are connected through China National Advanced Payment System (CNAPS).
The business steps are: A sends a payment instruction to Citibank, which deducts the payment after determining its balance; Citibank sends an instruction to Bank of China through the SWIFT channel, which deducts the payment after determining its RMB interbank current account balance; Bank of China transfers the funds to Agricultural Bank of China through CNAPS; Agricultural Bank of China settles the funds to B.
In the entire process, the main role of SWIFT and CNAPS is to realize interbank payment and settlement. Among them, SWIFT is an international cooperation organization among international banks, established in 1973; CNAPS is a system that provides final fund settlement for payment services between commercial banks and between commercial banks and the People’s Bank of China.