The Hong Kong Monetary Authority has reached an agreement with the United States Federal Reserve to allow Hong Kong to set up a US dollar clearing system, paving the way for SAR and mainland companies to offer US dollar-denominated shares. Under the agreement, the HKMA would appoint a bank as the settlement institution for the US dollar clearing system, Hong Kong Exchanges and Clearing chairman Charles Lee Yeh-kwong said. Applications from banks would close on Monday, a source said. Citibank, Chase Manhattan and HSBC are said to have expressed interest. 'This will benefit listed companies as they will be able to raise funds in US dollars,' Mr Lee said. The system would also help protect Hong Kong's linked exchange-rate system, he said. This is because companies will be able to raise funds directly in US dollars rather than raising funds in Hong Kong dollars and exchanging them. Mr Lee cited mainland companies that offered shares in the SAR to raise funds in Hong Kong dollars, as an example. Some of these companies might need to buy machines or materials in US dollars. The resulting currency transfers put pressure on the Hong Kong dollar peg system, he said. Mainland authorities were also considering allowing Hong Kong companies to raise funds in yuan if they needed mainland currency for their operations. He said Hongkong Clearing had also started to study the introduction of a multi-currency system that would be able to clear securities denominated in different currencies. He said companies listed on the soon-to-be-launched Growth Enterprise Market would issue shares only in Hong Kong dollars until the US dollar clearing system was introduced next year.