The Hong Kong Monetary Authority (HKMA) announced the launch of the delivery-versus-payment (DvP) link for cross-currency securities transactions between the Hong Kong dollar (HKD) CHATS and the Bank of Japan Financial Network System for Japanese Government Bond (BOJ-NET JGB) Services.
Clearing House Automated Transfer System, or CHATS, is a real-time gross settlement (RTGS) system for the transfer of funds in Hong Kong.
The link would support DvP settlement of the HKD sale and repurchase transactions using Japanese Government Bonds (JGB) as collateral.
This is said to help eliminate settlement risk by ensuring simultaneous delivery of HK dollars in Hong Kong and JGBs in Japan.
The DvP link, by providing a settlement infrastructure, would facilitate banks in conducting cross-currency repo transactions to obtain the HKD funds.
HKMA said in a statement that such a funding tool can prove to be useful, particularly in times of stress, as banks especially foreign ones, may mobilise their foreign currency debt securities for use in Hong Kong.
The link is operated by Bank of Japan in Japan and by Hong Kong Interbank Clearing Limited (HKICL) in Hong Kong.
The HKICL operates the interbank clearing systems in Hong Kong, and is jointly owned by the HKMA and the Hong Kong Association of Banks.
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