Insight & Analysis

Press release: Major market participants trade first triparty repo on ESG bonds in China

Published: Sep 2022

6th September 2022 – The China Foreign Exchange Trading System (CFETS) and global post-trade provider Clearstream have entered an infrastructure cooperation to enable Chinese market participants to trade ESG (environmental, social, governance)-eligible triparty repo bonds. The repo transactions are facilitated by CFETS’s exclusive bond and FX trading platform in mainland China, while Clearstream acts as triparty repo agent, streamlining collateral management, settlement and custody.

Newspaper press release

First trades were successfully performed by China Construction Bank, China Merchants Bank, Crédit Agricole CIB, Industrial and Commercial Bank of China and Shanghai Pudong Development Bank. All participants chose all eligible ESG bonds based on dedicated baskets provided by Clearstream. Leveraging triparty repo bonds, investors will benefit from diversified sources of funding, combined with a high degree of safety as well as outsourced collateral management and administrative functions.

Philip Brown, CEO of Clearstream Banking S.A., commented: “As a leading provider of global post-trade services, it’s at the heart of Clearstream’s mission to support investors around the globe who are seeking to include environmental, social, and governance aspects in their investment decisions. The cooperation aligns perfectly with this goal. We are excited, together with our renowned partners, to provide innovative, stable and internationally connected financial infrastructure to the largest market in Asia.”

Yuankai Wang, General Manager of Financial Markets Department, China Construction Bank, added: “Repurchase transaction has always been one of the main financing tools in financial markets. As the concept of sustainable development is increasingly valued, it is expected that green repurchase transactions are going to gradually become popular. We will continue to focus on green and sustainable development transactions, and develop more diversified green financial solutions.”

Jiawen Peng, General Manager of Asset and Liabilities Management Department, China Merchants Bank, added: “Repurchase transaction is an important financing tool in the interbank foreign exchange market. These triparty repo trades on ESG eligible foreign currency bonds are the result of joint efforts made by domestic and foreign institutions to promote the development of FX market infrastructure, which will further promote the development of green finance. China Merchants Bank has always been committed to the development and innovation in ESG finance. We are honoured to participate in the first batch of transactions and will continue to contribute.”

Xiaoming Zhu, Head of the Global Markets Division, Crédit Agricole CIB (China) Limited, added: “Crédit Agricole CIB has been a global leader in providing innovative green and sustainable financial products, and it is our great honour to cooperate with CFETS, Clearstream and Chinese financial institutions to execute the first triparty ESG foreign currency repo business. We have been adhering to the philosophy of actively promoting green finance and developing more diversified green finance solutions to support our clients to achieve their sustainable development goals.”

Changfa Zhu, General Manager of Global Markets Department, Industrial and Commercial Bank of China, added: “Triparty repo, as a common type of repo transaction in the global financial market, by tapping into the collateral management service of third-party professional institutions, contributes to a higher-efficient and lower-risk way of involvement in repo business by market participants. FX triparty repo with green bond as the collateral, while adding a new variety of repo trade to the onshore market, also manifests the development concept of green finance. Looking into the future, we would like to join the hands of financial peers to promote the development of onshore FX repo business and green finance.”

Hongli Xue, General Manager of Financial Markets Department, Shanghai Pudong Development Bank, added: “Acting as one of the most active participant in the domestic interbank market, SPD Bank makes continuous strides in business innovation. Building ‘Green Bank’ is one of the most important strategy of our bank. Diversified financial market business are actively adapted to the trend of green, such as green finance, green bond, etc. By the end of 1st half of 2022, we launched ‘ChinaBond SPDB ESG Bond Select Index‘, issued the first domestic European Union carbon emission quota linked structure product, which is a milestone of green trade. We are very honoured to participate to trade ESG-eligible triparty repos provided by CFETS and Clearstream because it represented an innovative measure of ‘Green Bank’. We will continue putting our efforts to promote the green financial markets business.”

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