currency at offshore locations. from an official / institutional perspective, it should be possible to hold official reserves in that currency, use it as a vehicle currency for foreign exchange intervention and anchor currency for pegging. therefore, an international currency has to be essentially a freely convertible currency with ability to attract significant volumes of international trades across regions by way of invoicing. in addition, the currency has to possess a greater degree of stability in its exchange rate determined by the market forces and a deep and liquid market with availability of wide range of hedging products. needless to add, it would also require to be supported by an efficient banking system and world class market infrastructure. going by the above characteristics of an international currency, one can argue that perhaps us dollar and euro are the only two currencies which can be truly considered as international currency at present, notwithstanding the recent debt related problems being faced by some of the major and peripheral eurozone countries. as compared to the share of us dollar and euro that together account for almost three - fourth of global trade invoicing, the share of other major currencies as well as chinese and indian currencies is quite small. 14. having stated the above, it needs to be recognised that in recent times, chinese authorities have taken a number of steps aimed at internationalising rmb. without going into the details of all these measures, i would briefly touch upon some of the major ones. as we understand, rmb is being used in trade and other current account transactions with vietnam, laos, myanmar, the central asian states, russia, and so forth. the development of offshore market and currency internationalization go hand in hand. in this regard, china has taken a number of steps towards developing an offshore market for rmb in hong kong which is an international financial centre. the active offshore deliverable rmb market in hong kong provides services such as international trade settlement in rmb, financing, rmb denominated bond issuance, etc. after the implementation of the pilot programme of crossborder trade settlement in rmb in 1999, there has been a rapid growth in cross - border rmb settlement volumes in hong kong. china has also undertaken a number of measures pertaining to the development of onshore market. this includes the widening of the rmb ’ s daily trading band against the us dollar from half per cent to one per cent above and below the reference rate in mid april 2012. this was motivated by the growing ability of the

- border activity. the fifth progress report on implementation of the otc derivatives market reform, published by the financial stability board ( fsb ) in april 2013, has reported that, eu, japan and the usa, which account for the largest volumes of otc derivatives activity, are among the most advanced in implementing legislative and regulatory reforms, with several key regulatory measures either already enforced or likely to be in force by mid - 2013. the recent guidelines issued regarding reforms in the otc derivatives segment by the eu include the markets in financial instruments directive ( mifid - ii ), markets bis central bankers ’ speeches in financial instruments regulation ( mifir ) and european market infrastructure regulation ( emir ). a number of other jurisdictions have reported that they expect regulatory measures related to trade reporting to come into force over the course of this year, and a few jurisdictions expect clearing requirements to come into force in 2013 – 2014. many jurisdictions have adopted rules to implement the basel iii capital framework for banks, including higher capital requirements for non - centrally cleared transactions. 9. the new regulatory requirements may have a substantial impact on the work flow for the market participants including the end users. these regulations also have exceptions for some category of participants and products. the end users must determine what is necessary to comply with the regulations from which they are not exempted. they must meet certain criteria in order to qualify for available exemptions and will need to be aware of the activities that could prevent them from qualifying for the exceptions in the future. depending on the extent to which the end users engage in otc derivatives, the costs associated with preparing for the above could be significant. some of these initiatives have also raised concerns about the possibilities of extra territorial regulatory jurisdiction leading to regulatory clashes and disruptions for market participants. further, as annat admati & martin hellwig point out ( “ the bankers new clothes ” - 2013 ) and i quote, “ these proposals presume that concerns about depositors and the payment systems are, or, should be, the major reason for governmental interventions to banking..... this approach has two weaknesses. first, protection of depositors and the payment system is not the only reason that might induce governments to bail out banks. second, commercial banking activities can also be a source of risks that cause banks to fail unless they are bailed out ” ( unquote ) 10. in summary, the common theme of all the proposals in the pipeline is one of putting sand in the wheels