RMB Launches Innovative Foreign Currency Clearing Solution For Banks In Africa
RMB Launches Innovative Foreign Currency Clearing Solution For Banks In Africa. RMB, the corporate and investment banking arm of FirstRand Bank Limited, has partnered with two large international banks to offer a foreign currency clearing solution to African banks. The solution has been endorsed by the United States Trade and Development Agency (USTDA) at the recently held Financial Inclusion for Africa conference, which the USTDA hosted in Cape Town in collaboration with RMB.
Costs for African diaspora remitters and importers and exporters are expected to be cut significantly, while efficacy of combating the financing of terrorism (CFT) and Anti-Money Laundering (AML) governance will be raised by closely working with banks across the continent. The clearing solution will serve banks across sub-Saharan Africa with RMB acting as a regional clearing hub to clear foreign currencies, including the US dollar, pound sterling and euro.
Says RMB CEO Emrie Brown: “Clearing foreign currency will provide an African gateway that will give retailers and traders easier, more cost-effective access to international markets via cross-border currency transactions. An Africa-based foreign exchange clearing hub means reduced fees for African importers and exporters, which will lead to lower costs of many goods and services in Africa, bolstering financial inclusion. It will have a positive real-world impact on people too, not just businesses.”
Africa rapidly experienced a phenomenon described as “derisking” over the last five years with many international banks exiting the Africa clearing market. As a result, exporters, for example, would receive delayed payment after their money travelled through several remote intermediaries – and after hefty fees were deducted because of all the steps in the process. Now direct and rapid clearance from an African regional-based clearing house means exporters receive more money, as fewer fees have been deducted. And they receive their funds more quickly.
Brown adds that the hub would benefit recipients of the billions of hard currencies remitted to Africa each year, as well as aid agencies and NGOs sending money to Africa. “The impact extends beyond facilitating the trade of goods and services. Remittances and foreign aid are both important financial flows for our continent. By working with banks across the continent and clearing currency flows into and out of Africa, people will receive more money in their pockets. This means more financial empowerment and meaningful social upliftment.”
The clearing hub will work closely with RMB’s African correspondent banks and global banking partners in raising the efficacy around important aspects such as compliance. To be part of the clearing hub, African banks will have to adhere to strict compliance rules. Banks that pass the compliance criteria will be seen to have good governance, thereby creating greater counterparty confidence in the banks and the banking systems of the countries in which they operate.
Says Brown: “We have worked closely with our two global banking partners to create a world class offering for Africa. We have run a successful pilot programme for the past two years, which underscores RMB’s growing leadership position in African banking.” RMB has offered clearing services to institutional clients who require complex post-trade solutions in Africa and across the world for the past 50 years.
