ENG-2013 — Page 94

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Financial and Monetary Affairs

Hong Kong was the world's ninth and Asia's second largest banking centre in terms of external positions2 in the Bank for International Settlements Quarterly Review for the end of 2013 position.

The interbank money market is well established. Hong Kong dollar (HKD) wholesale deposits. are traded actively among local authorised institutions (Als), and between local and overseas Als, with an average daily turnover of $217.4 billion in 2013.

Hong Kong has a robust real time gross settlement (RTGS) interbank payment system. All banks in Hong Kong maintain settlement accounts with the Hong Kong Monetary Authority (HKMA) through the HKD RTGS system. All RTGS payment transactions are settled in real time. The banks may obtain intra-day and overnight liquidity through repurchase agreements with the HKMA using the Exchange Fund Bills and Notes (EFBNs) as collateral.

US dollar (USD), euro and RMB RTGS systems also enable transactions in these currencies to be settled in real time, eliminating settlement risk. RTGS systems in Hong Kong are linked to enable foreign exchange transactions to be settled on a payment-versus-payment basis.

The HKMA's Central Moneymarkets Unit (CMU) provides clearing, settlement and custodian services for EFBNs and other HKD or foreign-currency private debt securities. It is linked to a number of international and regional central securities depositories to enable non-local investors to hold and settle securities lodged with the CMU and local investors to hold and settle securities lodged with overseas systems. Through its integration with the RTGS systems, the CMU enables securities to be settled on a delivery-versus-payment basis, enhancing settlement efficiency and eliminating settlement risk. The interface also enables users of the RTGS system to access intra-day and overnight liquidity through repurchase agreements.

Chart 6

20,000

HK$ Billion

15,000

External Positions of Authorised Institutions

15,283

13,246

10,000

12,483

11,153

9,662

5,000

0

2009

2010

2011

2012

2013

Year

Bond Market Development

Outstanding HKD debt securities, including Exchange Fund Bills and Notes, totalled $1,419 billion at the end of 2013, or 8.5 per cent higher than the previous year's $1,309 billion. The

2

Sum of liabilities to banks and non-bank customers outside Hong Kong and claims on banks and non-bank customers outside Hong Kong (such as equities, securities and capital instruments).

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