Fast cross-border transfers poised for mid-year launch

Cici Cao

The Hong Kong Monetary Authority and the People's Bank of China have announced six new measures to further deepen their connection, including the cross-border payment system, which is expected to launch by mid-year.

The fast payment systems connection will allow for real-time, small-scale cross-border payments 24/7, similar to Hong Kong's Faster Payment System, enabling residents of both regions to make instant cross-border transfers using their mobile-phone number, said HKMA chief executive Eddie Yue Wai-man.

Part of the services are expected to launch by mid-year, with the technical testing completed last month, and the service will be expanded and improved gradually.

Meanwhile, the HKMA plans to introduce a new yuan trade financing facility with a total allocation of 100 billion yuan (HK$106.17 billion) to offer banks stable and cost-effective funding.

The city's de facto central bank will provide financial institutions with yuan liquidity funds for terms of one, three and six months, with interest rates based on onshore yuan rates plus a margin, according to Yue.

The facility will be launched by the end of February.

However, it will not overlap with the current 40-billion-yuan liquidity and the 20-billion-yuan liquidity offered by HKMA-designated primary liquidity providers, said Kimberly Cheng Chi-man, head of HKMA's monetary operations division.

Cheng expects the new facility to encourage banks to offer yuan trade financing services.

Measures related to the Bond Connect were also mentioned.

The HKMA will extend the settlement time for transactions under the Southbound Bond Connect, as well as allow other currencies such as the US dollar and euro.

Additionally, it will support the establishment of an offshore yuan repurchase market using Northbound Bond Connect bonds as collateral.

Starting yesterday, overseas investors can use onshore bonds issued by the Ministry of Finance and mainland policy banks under Northbound Bond Connect as margin collateral for Northbound Swap Connect transactions, according to the Securities and Futures Commission.

Financial regulators in both regions have been working closely to promote the use of onshore yuan bonds as collateral in offshore markets, the HKMA said.

Further measures involve financial facilitation in the Greater Bay Area, with the PBOC's inclusion of new banks offering account opening by attestation services for Hong Kong residents.