74 | Financial and Monetary Affairs
collectively known as Als under the Banking Ordinance. The Hong Kong Monetary Authority (HKMA) is the licensing authority for all three types of Als.
Only licensed banks may conduct full banking services, including in particular the provision of current and savings accounts and acceptance of deposits of any size and maturity. Restricted licence banks may take deposits of any maturity of $500,000 or above. Deposit-taking companies may take deposits of $100,000 or above with an original maturity of at least three months. Many deposit-taking companies are owned by, or otherwise associated with, licensed banks.
Hong Kong has one of the highest concentrations of banking institutions in the world. In December 2005, there were 133 licensed banks, 33 restricted licence banks and 33 deposit-taking companies, which included the operations of banks from 30 countries around the world. These 199 Als maintained an extensive network of 1 298 local branches. In addition, there were 86 representative offices of overseas banks in Hong Kong. A local representative office is not allowed to engage in any banking business. Its role is confined to liaison work between the bank and its customers in Hong Kong.
The total deposit liabilities of all Als to customers and the total loans and advances extended by these institutions at year-end were $4,068 billion and $2,313 billion respectively. The total assets of all Als amounted to $7,248 billion.
Hong Kong has a robust interbank payment system, which operates through the Real Time Gross Settlement (RTGS) system. The Hong Kong dollar RTGS system, which was launched in 1996, has a single-tier settlement structure, with all banks maintaining settlement accounts with the HKMA. All RTGS payment transactions are settled in real time across the books of the HKMA. Intraday liquidity can be obtained by the banks through the use of their Exchange Fund Bills and Notes for intraday repurchase (repo) agreements with the HKMA.
The US dollar RTGS system and euro RTGS system have also been operating since 2000 and 2003 respectively, allowing real-time settlement of transactions in these currencies, thereby reducing or eliminating settlement risk caused by any time gap. Thanks to the interface between the three RTGS systems, Hong Kong dollar/US dollar/euro foreign exchange transactions can be settled on a payment-versus- payment (PvP) basis.
The Central MoneyMarkets Unit (CMU) Service, established in 1990, is operated by the HKMA to provide a clearing and custodian system for Exchange Fund Bills and Notes (EFBNs) and other private debt securities. The CMU system accepts both Hong Kong dollar and foreign currency denominated debt instruments. It has been fully. integrated with interbank payment systems, and is linked up with international central securities depositories like Euroclear and Clearstream to enable overseas investors to trade CMU securities. It also has established links with the regional central securities depositories on the Mainland China and in Australia, New Zealand and the Republic of Korea.