HONGKONG Bank is to lose its job managing the inter-bank clearing house when the Government takes over the role with the Hong Kong Association of Banks (HKAB) next year. The move paves the way for Hong Kong to adopt a real-time settlement system between banks, bringing the territory in line with international practice. An interim company has been formed that is equally owned by the Hong Kong Monetary Authority (HKMA) and HKAB, with a view to establishing a full company to run the system next year. The real-time gross settlement system (RTGS) will allow payment between banks to be settled instantly, so eliminating the next-day settlement process at present managed by Hongkong Bank. The move brings Hong Kong in line with other financial centres that are moving towards an instant form of inter-bank settlement, an HKMA spokesman said. The change is part of the HKMA's drive to rationalise Hong Kong's financial system, and has symbolic value in being the loss by the bank of another historic privilege. Hongkong Bank spokesman Robert Sherbin said the new clearing arrangement was a necessary change, since countries such as Australia, Singapore and Korea were moving towards real-time settlement. However one senior banker said: 'While necessary from a technical stance it is another example of the bank having anachronistic powers removed in the lead up to the 1997 handover.' Hongkong Bank has held the position of manager of the clearing house since 1981, and earns revenue on debit balances run by other HKAB banks. Hongkong Bank earned very little revenue from managing the clearing house, and the resources employed in running it could be put to more profitable use in other areas of its business, Mr Sherbin said. But its ability to access confidential information on other banks through its clearing role has been a source of irritation to other HKAB members. There are now 10 settlement banks and 159 sub-settlement banks, with Hongkong Bank contracted by the HKMA to be the management bank of the clearing house. The change follows an HKAB study last year which recommended that Hongkong Bank's role as the management bank be removed, allowing fairer competition in the sector. The interim company that will manage the formation of the system has six board members: three from the HKMA and one from each of the note issuing banks in the territory. Ian Wilson, general manager of Standard Chartered Bank in Hong Kong, said the shake-up was not a poor reflection on Hongkong Bank's management of the clearing house, but came from the need to reduce risk in the banking system. Today, the clearing house sees an average $200 billion of transactions on a daily basis, with turnover sometimes double the figure. Based at the HongKong Bank headquarters, it is independently incorporated and managed separately from the bank's main operations. The holy grail of real-time settlement would take time to achieve and would be worked towards gradually, said the HKMA spokesman.