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Enoch Yiu

Monday marks a milestone with individuals and companies in Hong Kong being able to write United States dollar cheques on their bank accounts.

It will mark the full implementation of the Hong Kong Monetary Authority's (HKMA) US-dollar clearing system, with 68 banks, including HSBC and Hang Seng Bank, ready to offer US-dollar cheque accounts.

The system means companies can speed up payments to suppliers who require payment in US dollars, saving time and charges for currency conversions.

Meanwhile, individuals will be better able to utilise the US dollar deposits they hold in the SAR.

One-quarter of Hong Kong's bank deposits are in US dollars, but previously, people could not write cheques drawn on these accounts in US dollars. It meant they were required to pay bank fees for remittances in US dollars.

The change will be particularly noticeable in the insurance industry as 90 per cent of insurance policies bought by Hong Kong residents are in US dollars.

'The US-dollar cheque clearing services will provide greater convenience to retail customers making US-dollar payments,' HKMA chief executive Joseph Yam Chi-kwong said.

A US-dollar cheque, drawn on a Hong Kong bank, will be settled in two days, instead of the two weeks it takes for US-dollar cheques drawn on banks in the US.

Monday will also see bond traders receiving faster settlement as the HKMA will link the US-dollar clearing system with the Central Moneymarkets Unit (CMU), the local debt securities custodian run by the HKMA.

This means traders of US-dollar bonds placed in the CMU will be able to settle the deals immediately after the transaction, instead of having to cope with the previous 12-hour wait.

The HKMA developed the US-dollar clearing system to reduce local market settlement risks, the head of the HKMA market systems division, Esmond Lee Kin-ying, said.

'The HKMA's US-dollar clearing system is the first of its kind in Asia,' Mr Lee said.

'This will attract other Asian investors to trade in Hong Kong.'

Before the introduction of the system in August, local and other Asian traders of US currencies or US-dollar denominated bonds and stocks had to settle the deals in the US.

Due to the time difference, it meant a 12-hour wait for settlement.

The first phase of the US-dollar clearing system enabled banks to transfer US-dollar funds from one bank to another.

In September, it was extended to cover foreign currency trading involving US and Hong Kong dollars.

HSBC is the HKMA's clearing agent of the US-dollar system.

During the past three months, there have been 2,000 daily transactions settled involving some US$3 billion, according to Andrew Long, HSBC head of payments and cash management for the Asia-Pacific region.

Forex transactions settled by the system stood at about US$1.5 billion a day.

'This is an indication that many banks prefer to use the new system to achieve faster settlement,' Mr Long said.

The US-dollar clearing system has 62 banks as direct participants and 59 banks as indirect participants, including 22 overseas lenders.



Start nears for US$ cheque accounts