HKMA and Bank of Thailand launch linked clearing system

30-Jul-2014 Intellasia | SCMP | 6:00 AM Print This Post

The Hong Kong Monetary Authority (HKMA) and the Thai central bank yesterday launched a new cross-border clearing system, in the latest move to connect the city with other regional and global market centres.

Traders and bankers in the two markets will now be able to settle foreign-exchange transactions in US dollars versus Thai baht in real time during Asian business hours, without having to wait for US markets to open to get the necessary dollars.

Hong Kong’s de facto central bank, by linking up its settlement system with the Bank of Thailand, will allow its Thai counterpart to dip into its huge US dollar pool and its advanced clearing system.

“Banks in Thailand can better manage their counterparty risk and improve operational efficiency in settling foreign-exchange transactions, while banks in Hong Kong will find new business opportunities to serve banks in Thailand,” said Peter Pang Sing-tong, deputy chief executive of the HKMA, at the launch.

This is the third time the HKMA has established such a link-up with an Asian central bank. Hong Kong connected its US dollar settlement system with Malaysia in 2006 and with Indonesia in 2010.

The city also linked up its US dollar clearing system with the mainland’s in 2009.

Since 2010, the average combined daily turnover of the channels with Malaysia and Indonesia had doubled, reaching a record $5.4 billion last month, an annual growth of about 23 per cent, Pang said.

Krirk Vanikkul, deputy governor for financial-institutions stability at the Bank of Thailand, said the new link improved the efficiency of the payment system in Thailand with “a reliable payment infrastructure in line with international standards”.

During the Asian financial crisis, when the Thai baht came under attack by speculators, Hong Kong agreed to extend credit of up to $1 billion to Thailand, which drew down $862 million from October 1997 to July 1999.

The loan, along with the interest, was fully repaid in 2003, a year ahead of schedule.

Ever since that crisis, the HKMA has worked closely with other Asian central banks to improve risk management.


Category: Hong Kong

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