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FINANCIAL AND MONETARY AFFAIRS

The total deposit liabilities of all authorised institutions to customers and the total loans and advances extended by these institutions at the end of 2001 were $3,357 billion and $2,186 billion, respectively. The total assets of all authorised institutions amounted to $6,155 billion.

Hong Kong has a robust interbank payment system, which was changed to the Real Time Gross Settlement (RTGS) system in December 1996. The HK Dollar RTGS system is 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.

Leveraging on the experience with the HK Dollar RTGS system, the HKMA introduced the US Dollar RTGS system in August 2000. The system allows participants to settle US dollar transactions real-time in the Asian time zone and thereby to reduce or eliminate foreign exchange settlement risk caused by the time gap. Since its full implementation, the system has been operating smoothly and has attracted an increasing number of participants. At the end of 2001, there were 65 direct participants and 115 indirect participants. Among the indirect participants, 74 were from overseas. Turnover of the system grew to 3 100 transactions per day with a total value of over US$5.1 billion.

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, as well as private sector debt issues. There are 188 CMU members, most of which are financial institutions in Hong Kong. At the end of 2001, there were 1 009 issues with a total value of $208.54 billion equivalent lodged with the CMU. The CMU system accepts both Hong Kong dollar and foreign currency denominated debt instruments. It has been fully integrated with the interbank payment systems, and is linked up with the international central securities depositories like Euroclear and Clearstream to enable overseas investors to trade CMU securities. It has also established bilateral links with the central securities depositories in Australia, New Zealand and the Republic of Korea.

Through a seamless interface with the US Dollar RTGS system, the CMU enables members to settle US dollar securities on a delivery versus payment (DvP) basis. As such, the outstanding amount of US dollar securities lodged with the CMU has increased twofold to US$1.54 billion from the previous year.

Hong Kong Monetary Authority

The HKMA was established in April 1993. The Exchange Fund (Amendment) Ordinance 1992 provides for its establishment.

The HKMA's policy objectives are to maintain currency stability, within the framework of the Linked Exchange Rate System, through sound management of the Exchange Fund, monetary policy operations and other means deemed necessary; to ensure the safety and stability of the banking system through the regulation of banking business and the business of taking deposits, and the supervision of authorised institutions; and to promote the efficiency, integrity and development of the financial system, particularly payment and settlement arrangements.