(Yicai Global) Dec. 9 -- The People's Bank of China, the country's central bank, launched an electronic information exchange system for letters of credit today to address problems that have long stymied use of these payment guarantees.
The system ran safely and stably on its first day, with business processed in a timely and effective manner, the China National Clearing Centre, its developer and operator, said in a statement today. As of 11 a.m., a total of 20 letters of credit worth CNY165.22 million (USD23.5 million) had been processed by seven banks.
The new system achieves online capital settlement using letters of credit by supporting direct inter-bank communication and solves the drawback of non-uniform business standards by providing banking institutions with a uniform standard to open and process letters.
Letters of credit, a time-honored type of promissory note, are mostly used in trade settlements. Problems that have beset the field include non-uniform standards and inconvenient inter-bank data swapping and capital clearing.
The first lenders to use the new scheme include China's six largest state-owned commercial banks; five joint-stock commercial banks, namely China Merchants Bank, Shanghai Pudong Development Bank, China Citic Bank, China Minsheng Bank and Ping An Bank; and urban commercial lenders Bank of Shanghai, Bank of Hangzhou and Guilin Bank.
More banks will be included in the system in batches, the CNCC said.