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single tier system in which all licensed banks would maintain clearing accounts with the HKMA;

seamless interface with the Central Moneymarkets Unit operated by the HKMA to enable the banks to obtain intraday liquidity through same-day Repurchase Agreement to fund their clearing account payments; and

allowance for domestic and international linkages to facilitate real time delivery versus payment (DvP) and real time payment versus payment (PvP).

The report also recommends the establishment of a new clearing and settlement company to be jointly owned by the HKMA and HKAB,

Financial liabilities of this new clearing company would be guaranteed by the HKMA and the three Continuing Members of HKAB.

The capital cost associated with the implementation of RTGS is still being assessed, but is expected to be cheaper than similar systems elsewhere, given the geographical compactness of Hong Kong and its advanced telecommunication system and electronic banking technology.

"The report offers a clear direction for the development of Hong Kong's payment and settlement systems," Chairman of HKAB Mr Paul Selway-Swift said.

"We will need to review the report in detail within the Association but are comfortable with the main conclusions reached," he said.

The Chief Executive of the HKMA, Mr Joseph Yam, said: "I am pleased with the Report's main conclusion that Hong Kong would be able to implement an RTGS system which meets the international standards within a short time frame.

"However, we need to study in greater detail the report's findings according to the basic parameters advised by CPS. We will present HKMA's recommendations on the way forward to the Exchange Fund Advisory Committee."

At present, the payment and settlement arrangements are provided by the Clearing House of the HKAB, which has contracted the Hongkong and Shanghai Banking Corporation Ltd. as the Management Bank to operate the clearing system.