XN000022-1994-02-01 — Page 6

TUESDAY, FEBRUARY 1, 1994

CONSULTATIVE PAPER ON INTERBANK PAYMENT SYSTEM

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THE HONG KONG MONETARY AUTHORITY (HKMA) TODAY (TUESDAY) ISSUED CONSULTATIVE PAPER ON HONG KONG'S INTERBANK PAYMENT SYSTEM TO THE HONG KONG ASSOCIATION OF BANKS (HKAB) AND OTHER INTERESTED PARTIES.

THE CONSULTATIVE PAPER CONTAINS FINDINGS OF AN INITIAL STUDY AND RECOMMENDATIONS ON THE SUBJECT BY A WORKING PARTY SET UP LAST YEAR BY THE HKMA.

THE WORKING PARTY, CHAIRED BY

EXECUTIVE DIRECTOR (MONETARY

MANAGEMENT) OF THE HKMA, MR NORMAN CHAN, COMPRISES REPRESENTATIVES OF THE THREE CONTINUING MEMBERS OF HKAB THE HONGKONG BANK, THE STANDARD CHARTERED BANK AND THE BANK OF CHINA.

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IT RECOMMENDED THAT THE INTERBANK PAYMENT SYSTEM SHOULD MOVE TOWARDS REAL TIME GROSS SETTLEMENT (RTGS) AS SOON AS POSSIBLE.

EXPLAINING THE BACKGROUND TO THIS TECHNICAL SUBJECT, THE CHIEF EXECUTIVE OF THE HKMA, MR JOSEPH YAM, SAID THE EXISTING INTERBANK PAYMENT SYSTEM HAD SERVED HONG KONG VERY WELL.

"HOWEVER, IN ORDER THAT HONG KONG CONTINUES TO MAINTAIN ITS COMPETITIVENESS AS AN INTERNATIONAL FINANCIAL CENTRE, WE SHOULD LOOK AHEAD AND FIND WAYS TO IMPROVE FURTHER THE EFFICIENCY AND ROBUSTNESS OF OUR INTERBANK PAYMENT SYSTEM IN LINE WITH INTERNATIONAL STANDARDS, HE SAID.

RTGS WILL ENABLE LARGE VALUE PAYMENTS TO BE SETTLED INSTANTANEOUSLY AND ONLY WHEN THE PAYING BANK HAS SUFFICIENT FUNDS. THIS WOULD MINIMISE WHAT IS COMMONLY REFERRED TO IN THE BANKING CIRCLE AS SETTLEMENT RISK.

CURRENTLY PAYMENTS MADE TODAY ARE ONLY FINALLY SETTLED TOMORROW AND THERE ARE RISKS IN THE MEANTIME.

"THE INTERBANK PAYMENT SYSTEM WOULD BE A LOT MORE ROBUST IF

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THIS RISK IS ELIMINATED AS FAR AS POSSIBLE. MR YAM SAID.

FOR THE BANK CLIENTS, RTGS WOULD ENABLE FUNDS, AT LEAST THE LARGE AMOUNTS, TO BE AVAILABLE FOR USE VIRTUALLY MINUTES AFTER THEY ARE RECEIVED.

USED MORE EFFICIENTLY,

AND FOR

"IN OTHER WORDS, MONEY CAN BE SAFELY, AND HEREIN LIES THE COMPETITIVE EDGE THAT WE MUST ACQUIRE BONG KONG, IF WE ARE TO CONTINUE TO DEVELOP ላና AN INTERNATIONAL FINANCIAL CENTRE, MR YAM SAID.

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"WITH A SUPERB TELECOMMUNICATION SYSTEM, HONG KONG HAS THE POTENTIAL TO BECOME A FULLY ELECTRONIC BANKING CITY. RTGS HAS MERITS FOR THE BANKS, BUSINESS AND THE CONSUMER. THIS WOULD BE STEP FORWARD FOR HONG KONG, HE ADDED.

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POSITIVE

THERE ARE A NUMBER OF PRACTICAL ISSUES SUCH AS COSTS AND CHANGES TO THE COMPUTER SYSTEM OF HKAB THAT NEED TO BE FURTHER STUDIED BEFORE RTGS CAN BE IMPLEMENTED IN HONG KONG.

/THE CONSULTATIVE