Chinese financial authorities plan to restrict the yuan settlement pilot program to companies with solid credit records initially and will strictly control risks, vice central bank governor Su Ning said on Monday.

Banks that participate in the trial project must verify cross-border transactions to ensure they are real deals, Su said. He added that lenders had to report information on yuan settlement to the central bank in a timely manner.

"The central bank has required lenders to shoulder the responsibilities to examine deals," Su said. "As yuan settlement is a new business, we should work together to control risks." The Bank of China yesterday signed yuan clearing agreements with 11 overseas lenders including Standard Chartered Bank, the Bank of East Asia and OCBC Bank. It also opened yuan clearings accounts at 17 overseas outlets to smooth future transactions.

"Yuan settlement will bring about huge opportunities to both domestic and overseas banks," said Bank of China President Li Lihui. "We have an upper hand in the yuan settlement business as we have good partnerships with a lot of financial institutions abroad."

The Bank of China yesterday also signed agreements with more than 20 Shanghai-based enterprises including Baosteel Group, Shanghai Construction Group and Shanghai Zhenhua Port Machinery Co to help them settle trade in yuan.

Earlier media reports said about 100 companies were expected to take part in the yuan settlement trial in Shanghai. Finance, commerce, Customs, tax and banking authorities have the rights to pick qualified participants.

Apart from the Bank of China and Bank of Communications, the initial two lenders allowed in the pilot program, a dozen more lenders in Shanghai have applied to launch yuan settlement, Su said yesterday.

"Domestic banks are eager to participate in the yuan settlement project and we also received inquiries from the local subsidiaries of foreign banks about the business," Su told reporters.

(Shanghai Daily July 7, 2009)