Hong Kong Implements IMF Recommendations On Settlement System

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

06 July 2004

Hong Kong lawmakers on Friday approved new legislation designed to protect the territory's clearing and debt settlement systems in the event of a bank collapse.

The Clearing and Settlement Systems Ordinance was created following recommendations by the International Monetary Fund (IMF), and will pave the way for Hong Kong to join the Continuous Linked Settlement (CLS) system later in the year.

The Ordinance aims to ensure that the jurisdiction's currency and debt clearing systems are overseen by the Hong Kong Monetary Authority, which will have the final say over incomplete settlements and creditor arrangements if a participating bank becomes insolvent.

The South China Morning Post quoted HKMA chief executive Joseph Yam Chi-kwong as observing, following legislative approval of the new Ordinance, that:

"The new legislation will further strengthen the financial infrastructure in Hong Kong by providing legal certainty to transactions cleared and settled through designated systems,"

He went on to announce that:

"Under the ordinance, the HKMA will perform its role as an overseer of designated systems to ensure these systems are operated in a safe and efficient manner. This will ensure the systems are sufficiently robust in supporting the domestic and cross-border financial activities in Hong Kong."

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