Industrial Bank : IB Breaking the Ice By Concluding the First Interest RateSwap Transaction in the Free Trade Zone

On Apr 8, the Capital Operation Center of IB concluded the first interest rate swap transaction with DBS Shanghai Branch through FTZ trade system of China Foreign Exchange Trade Center. It marks the ice breaking of Chinese interest rate swap market in the free trade zone.

It is reported that the transaction, based on the 7-day repo rate of Chinese inter-bank market, was incurred within free trade account system of Shanghai Free Trade Zone, with RMB as notional principal and USD as settlement currency.

RMB interest rate swap trade means a financial agreement that, within a certain period of time in the future agreed by both parties, interests were calculated and swapped according to agreed RMB principal and interest rate. The interest rate swap with USD as settlement currency, also known as NDIRS (Non-Deliverable Interest Swap), was created for overseas enterprises and financial institutes that cannot invest directly into domestic financial markets to hedge the risks in RMB interest rate and Chinese monetary policies, and also serve as an investment product for investors.

Insiders argued that, while China is close to fully liberalize its exchange rate and interest rate, there is increasing demands from overseas investors to participate in domestic financial market. As a bridge connecting domestic and overseas investors, the icebreaking of interest rate derivative market in the FTZ provides more diversified products and direct channel for overseas investors seeking to invest in domestic market, and helps domestic institutes better control the pricing power in RMB interest rate market.

In the field of capital trade, IB is known for its market sensitiveness and innovative business with which it builds a leading advantage and market position. As a body specialized in capital trade of IB, and the first comprehensive and specialized capital operation outfit with separate license, independent accounting and management in China, IB Capital Operation Center has becoming one of the most active institutes in various domestic financial markets such as constant return market, bill market, monetary market, foreign exchange market and commodity market.

In recent years, centered on RMB internationalization and FTZ construction, IB has given full play of its first mover advantage in financial market. Relying on the Capital Operation Center, it constantly explores the new blue ocean in the FTZ as well as cross-border financial market, and contributes to the construction of Shanghai International Financial Center. In June 2015, the Center accepted and passed the inspection of access to the ledger accounting unit system of PBC Shanghai head office. Since then, IB has, by utilizing FT accounts, gradually expanded various capital businesses under FT based on its rich and established experiences in domestic and international financial markets.

'The NDIRS transaction concluded this time not just enriched our FTZ capital products, provided a better platform and opportunities for expanding overseas clients, but also created a leading card for the implementation of financial derivates in Shanghai FTZ by China Foreign Exchange Trade Center,' said Ma Dajun, GM of IB Capital Operation Center.