DBS Group is to offer cross-border yuan settlement services to business customers in Hong Kong and Singapore - and is applying to do so in China.

The move will see DBS become the second Singapore bank to offer such services after OCBC Bank.

It will also allow the bank to take advantage of new rules that permit firms to settle trades with overseas parties in the Chinese currency.

Last month, the Chinese government unveiled regulations granting some 400 companies in Dongguan, Guangzhou, Shanghai, Shenzhen and Zhuhai the right to settle their trades with overseas counterparties in yuan.

OCBC was the first local bank to participate in China's yuan trade settlement pilot scheme, and was among the initial batch of 11 overseas banks taking part.

China's move to allow yuan settlement of trades will benefit companies in Asia with yuan payables and receivables by helping them reduce their foreign exchange exposure, said DBS yesterday.

The bank is already offering the yuan settlement service to customers in Hong Kong and is expected to roll it out to corporate and small- and medium-sized enterprise clients in Singapore very soon.

DBS said it is applying under China's pilot scheme to be an onshore agent bank so that it can provide such services to its Chinese customers.

With this status, it will be able to directly help domestic Chinese enter-prises settle their overseas trades in yuan.

DBS China is to open a branch in Dongguan - China's third-largest exporting region - this month.

'With the emergence of China as an economic powerhouse, many of our corporate customers are increasingly trading with it,' said DBS head of institutional banking Jeanette Wong.

'At a time of market volatility, we are pleased to have a platform to help our customers in Hong Kong - and very shortly Singapore - settle their trades in yuan so they can better manage their foreign exchange risks,' she added.

This article was first published in The Straits Times.