ENG-2002 — Page 108

FINANCIAL AND MONETARY AFFAIRS

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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. Many deposit-taking companies are owned by, or otherwise associated with, licensed banks. Deposit-taking companies may take deposits of $100,000 or above with an original maturity of at least three months.

Hong Kong has one of the highest concentrations of banking institutions in the world. At year-end, 133 licensed banks, 46 restricted licence banks and 45 deposit- taking companies, which were beneficially owned by interests from 31 countries around the world, were in business in Hong Kong. These 224 AIs operated a comprehensive network of 1409 local branches. In addition, there were 94 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 AIs to customers and the total loans and advances extended by these institutions at year-end were $3,318 billion and $2,077 billion, respectively. The total assets of all AIs amounted to $6,000 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 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.

Leveraging on the experience with the Hong Kong 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. As of December, there were 64 direct participants and 149 indirect participants. Among the indirect participants, 102 were from overseas. Turnover of the system grew to 3 300 transactions per day with a total value of over US$5.3 billion.

With a view to further enhancing the financial infrastructure in Hong Kong, the HKMA aims to introduce the Euro RTGS system in April 2003. Similar to the technology used for the Hong Kong dollar and US dollar RTGS systems, the Euro RTGS system is built on the same infrastructure and offers a range of advanced and sophisticated clearing functions. The key functions include the real-time gross settlement for Euro payments and for payment versus payment (PvP) between Euro and US dollar or Euro and Hong Kong dollar foreign exchange transactions. The system also maintains a seamless interface with the Central Moneymarkets Unit (CMU) to cater for the delivery versus payment (DvP) of Euro denominated debt securities and repo facilities.

The 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 176 CMU members, most of which are financial institutions in Hong Kong. At year-end, there were 1 115 issues with a total value of $216.6 billion equivalent lodged with the CMU. The CMU system accepts both Hong