The Asian Banker

BoT and HKMA establish cross-border PvP link
Jul 17, 2013

July 15th 2013 - Bank of Thailand (BOT) and the Hong Kong Monetary Authority (HKMA) jointly announced today (Monday) the establishment of a cross border payment-versus-payment (PvP) link between the Thai Baht real time gross settlement system (BAHTNET) in Thailand and the US Dollar Real Time Gross Settlement system (USD RTGS system) in Hong Kong, to be launched in the second half of 2014. This will be the third cross-border PvP link between two real time gross settlement systems for two different currencies in the Asian region.

This PvP link will eliminate the principal risk of a foreign exchange (FX) transaction whereby a market player has delivered the currency it has sold but does not receive the currency it has bought.

The establishment of this PvP link between BOT and the HKMA will increase the efficiency and safety of the FX settlement between US dollar in Hong Kong and Thai Baht in Thailand.

As the US dollar versus Thai Baht transactions account for about 85% of Thailand’s FX transaction in 2012, banks in Thailand can benefit from the reduction in settlement risk and increase in efficiency in executing the settlement of FX transactions. The new PvP link can also promote the development of a wider range of bank services and financial products in Thailand, as well as supporting the country’s economic integration into the region. It will also help to build up Thailand's readiness for the AEC 2015 (ASEAN Economic Community). The new linkage between the two payment systems will strengthen the role of Hong Kong as a payment hub in the region and will offer business opportunities to Hong Kong banks in recruiting Thai banks for providing payment and cash management services.

Mr. Peter Pang, Deputy Chief Executive of the HKMA, said, "The PvP link between the USD RTGS system in Hong Kong and the Thai Baht RTGS system in Thailand builds on the success of the existing model of cross-border PvP link between Hong Kong and other Asian economies. It promotes safer and more efficient payment flows, and eliminates the settlement risk of FX transactions, which involve the delivery of different currencies in different time zones. I am glad that Bank of Thailand and the HKMA share the same view on a closer cooperation of central banks for developing a robust financial infrastructure with the aim of promoting monetary and financial stability in the region."


Re-disseminated by The Asian Banker

Categories: Technology & Operations
Keywords: BoT, HKMA

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