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Hong Kong Monetary Authority (HKMA)

HKMA drops Asiaclear for simpler regional cross-border debt system

PUBLISHED : Saturday, 05 June, 2010, 12:00am
UPDATED : Saturday, 05 June, 2010, 12:00am

The Hong Kong Monetary Authority has abandoned its 17-year plan to establish an 'Asiaclear' system to service the region's debt markets, and is instead choosing a simpler option.

Next year, it will introduce a pilot platform that will link up the debt-clearing systems of Hong Kong, Malaysia and Euroclear to allow cross-border debt-clearing and collateral arrangement.

'Asiaclear was a great idea but it proved to be a dream too difficult to turn into reality. That was an idea we have worked on for almost two decades but with far too little progress,'' said Eddie Yue Wai-man, a deputy chief executive of the HKMA.

'Now, the new idea is better because it can be implemented quickly and easily. The common platform model will link up individual clearing systems in different countries in Asia electronically as early as next year.''

Asiaclear was the brainchild of former HKMA chief executive Joseph Yam Chi-kwong, who promoted the concept shortly after the authority's establishment in 1993. Like Euroclear, Asiaclear was intended to be a single clearing house to act as custodian and clearing agent for all debt paper traded in Asia.

Bankers said the Asiaclear concept ran into difficulty because Asian markets including Hong Kong, Thailand, Indonesia and Singapore each had their own central debt clearance and settlement systems and did not want to lose the autonomy of their own systems.

The proposed common platform model will solve this problem as it will preserve the autonomy and custodial function of individual debt clearance systems in the region.

Esmond Lee, an executive director (financial infrastructure) with the HKMA, said the common platform worked as a 'common servant'' to offer standard clearing services and allowed them to use debt securities from other markets as collateral.

The HKMA will spend about HK$2 million to introduce an electronic network to link the debt clearance and settlement systems of Hong Kong, Malaysia and Euroclear. Indonesia and Thailand have expressed interest in joining as observers.

The new platform will settle cross-border debt trading between Hong Kong, Malaysia and Europe. 'This will save time and money for investors who want to do cross-border debt trading,'' Lee said.

The new platform will also allow investors and banks to use debt securities from different markets as collateral to secure bank lending.