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Allowing Restricted Licence Banks to Access the Real Time Gross Settlement System

The Hong Kong Monetary Authority (HKMA) today announced that an agreement in principle has been reached with the Hong Kong Association of Banks (HKAB) and Hong Kong Interbank Clearing Limited (HKICL) that Restricted Licence Banks (RLBs) can be granted access to the Real Time Gross Settlement System (RTGS). HKICL is now working on the legal arrangements for admitting RLBs into the system.

"The initiative announced today is one of the measures under the previously announced three-year reform programme to raise the level of competitiveness of the banking industry and to enhance the safety and soundness of the banking system. As stated in the HKMA's policy response to the Banking Sector Consultancy Study, access to the RTGS should be based on business need rather than licensing status. Allowing RLBs to access the RTGS will enable these institutions to provide more efficient services to their customers and reduce settlement risk for these institutions. It will also help to promote competition in the banking sector", said Mr David Carse, Deputy Chief Executive of the HKMA.

Once the legal arrangements are put in place early next year, RLBs wishing to access the RTGS will be able to present their business need to join the RTGS to the HKMA. After the approval of the HKMA is obtained, they should submit an application along with the admission fee (which will be the same charge as for new licensed banks joining the clearing house) and a systems enhancement cost to HKICL. The amount of the admission fee and the systems enhancement cost will be set at a reasonable level and will be determined and announced by HKICL later.

When granted access to the RTGS, RLBs will be able to process large value inter-bank payments and also payments in settlement of securities transactions settled through the Central Moneymarkets Unit. The HKMA will discuss with the Hong Kong Securities Clearing Co Ltd whether RLB participants in the RTGS can handle money settlement for equities transactions settled through the Central Clearing and Settlement System. To facilitate the smooth operation of the RTGS, they will be offered intra-day repo facilities and access to the Discount Window in the same way as their licensed bank counterparts. The balances in the settlement accounts of RLBs will be treated as part of the Aggregate Balance and will be covered by the Convertibility Undertaking of the HKMA.

"In accordance with the timetable for the banking sector reform programme, we have clarified the HKMA's role as the lender of last resort, relaxed the one branch policy for foreign banks and set out today the arrangements for RLBs' admission to the RTGS. During next year, our focus will be on deregulation of the remaining interest rates rules subject to monitoring of a set of economic and financial performance indicators, the commissioning of a full study on depositor protection in Hong Kong, and a study on the feasibility of establishing a credit register for commercial enterprises", Mr Carse added.

 

Hong Kong Monetary Authority

29 December 1999

Last revision date: 1 August 2011
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