HKMA Chief Urges Banks To Support Settlement Systems

by Mary Swire, for LawAndTax-News.com, Hong Kong

11 July 2006

Writing recently, Hong Kong Monetary Authority chief executive, Joseph Yam argued that both the HKMA and the banking community have a part to play in ensuring the Real Time Gross Settlement, or RTGS, payment systems continue to operate efficiently.

In his weekly column 'Viewpoint', Mr Yam noted that the authority is already reviewing whether the system needs to be strengthened and will work closely with banks who use the system to their benefit - generating the heavy traffic.

However, he warned that the banks will need to look at their own capacity and capability to make sure they can handle heavy traffic, too, observing that:

"As payment gridlocks can make financial traffic go elsewhere permanently, we must work together to maintain the record of zero settlement failure in our RTGS payment systems."

The RTGS is used to facilitate the flow of funds in different currencies among banks in Hong Kong. The system with the heaviest traffic is the Hong Kong dollar RTGS system. It saw HK$467 billion worth of transactions settled each day on average in 2005.

Mr Yam revealed that Hong Kong dollar traffic among licensed banks has also been increasing at a rate of 13% a year in the past three years, mainly as a result of the SAR's expanding role as an international financial centre and the economic recovery.

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