Derivatives house of the year, Singapore: OCBC Bank

Risk Asia Awards 2025

Wee Wei Min, OCBC Bank

OCBC Bank has expanded its foreign exchange product suite this year with the addition of new onshore renminbi options to capture growing hedging demand from Chinese clients. The Singaporean bank has also demonstrated its commitment to innovation with a new tokenised bond initiative and bolstered its environmental and social governance (ESG) credentials with a new swap product that is helping to finance social projects.

According to the latest government data, China’s total outbound direct investment for 2024 was 1.2 trillion yuan ($162 billion), representing a year-on-year increase of 11.3% in yuan terms.

Wee Wei Min, global head of sales and structuring, global markets at OCBC, says a lot of these flows end up in Singapore and other countries in the ASEAN region, such as Thailand, Malaysia and Vietnam. This includes investments in roads, railway infrastructure, industrial factories and data centres.

“As a result, we have seen a huge pick-up in both our CNY and our CNH volumes,” Wei Min says.

OCBC has been able to offer both CNY spot and forward trades for some time. In the past year, the bank decided to add another derivatives product to the mix: CNY options.

The timing was optimal. As the renminbi has weakened last year, clients had been looking for a better hedging rate than they get through the FX forwards market.

When clients hedge with FX forwards, they have to pay the reserve cost for one year, regardless of the tenor. CNY options improve efficiency, potentially reducing costs by as much as a third.

This gives clients much greater flexibility in deciding whether to hedge their currency risk through the CNY or CNH markets. The basis between the two markets has been particularly volatile this year, widening significantly at least four times on the back of geopolitical shocks, before falling back again.

Wei Min says it is more common for banks based in Singapore to offer CNH options rather than CNY options. She says very few Singaporean banks offer both.

Tokenised bonds

In January, OCBC started offering bespoke tokenised bonds to corporations with net assets exceeding S$10 million ($7.8 million). The institution claims it was the first Singaporean bank to mint such assets.

“This is a powerful liquidity management tool for clients that we are proud to have developed on our asset tokenisation platform,” Wei Min says. “Corporate bonds usually have a high minimum transaction size of S$250,000, which could contribute to concentration risk, but with our tokenised bonds, clients can buy and sell in sizes as low as S$1,000. Every time they need liquidity, they come to us and we provide them with an exit price for their required amount.”

Being able to trade tokenised bonds in such small slices also has some other clear advantages.

One is the time it takes to settle the fixed income asset.

With traditional bonds, settlement often takes at least two days (T+2). Wei Min says that in the Singapore dollar market it is not uncommon for settlement time to stretch to five days (T+5), due to delays of other banks delivering the bond.

Tokenisation allows OCBC to provide settlement for its bonds on the same day (T+0), significantly reducing credit risk exposure, and allowing clients to collect the interest immediately.

Furthermore, clients don’t have to pay any custodian fees with these bespoke tokenised bonds, as they might have to if they were trading traditional bonds.

Clients, of course, still retain the credit risk of the assets, as they would with a traditional bond. Should a bond default, OCBC will still deliver the bond to the client.

“This was quite an eye-catching initiative, attracting a lot of interest from other institutions wondering how we did it,” says Wei Min. “Minting the token is fairly straightforward; it can be done in a matter of seconds. It’s the technology and the trading capabilities that make this possible.”

OCBC may or may not own the underlying bond. Wei Min says it is up to the bank’s traders to decide whether or not they want to purchase the bond, or to fund coupon payments by buying credit protection on the issuer.

Now that everything is in place, the solution doesn’t just have to apply to bonds.

“You could use it for any asset class. It could be a basket of equities. It could be a single stock. This is very flexible in terms of asset class,” Wei Min says.

Environmental, social and governance

Over the past year, a backlash against ESG investing has been gathering steam in the US and Europe. OCBC, though, nevertheless remains committed to providing its clients with solutions to help them in their sustainability journey.

From September, operators of ships that cross into Europe will need to pay for their carbon emissions under the EU’s Emissions Trading System. To help them with this, OCBC is offering tools for clients to purchase carbon credits, incorporating sustainability-linked swaps where appropriate.

But it isn’t just the ‘environment’ side of the ESG acronym that OCBC is focusing on. Earlier this year, the bank introduced what it describes as a new social swap, whereby if a client meets certain key performance indicators, the bank will contribute towards the funding of a social project together. For instance, using this initiative, OCBC worked with one client to sponsor wheelchairs for the Red Cross. Once the client met predefined key performance indicator criteria, OCBC provided cash to purchase the wheelchairs.

“OCBC’s strategic ambition is consistently clear and bold, which is to be Asia’s leading financial services partner for a sustainable future,” Wei Min says. “We need to provide holistic ESG solutions for our clients to help them on their sustainability journeys.”