As
a general rule, a country has a clearing system (payment system) or
systems for its national currency only. That’s because payments
are generally settled through accounts at the central bank or
equivalent for each currency.
In most countries there usually are
separate systems dedicated to specific purposes—large value
payments, small repetitive payments (whose delivery may not be as
time-sensitive), check clearing, etc.
As an example, the USA has
FedWire for large domestic payments, CHIPS primarily for cross-border
payments, ACH for small repetitive payments, and one Fed and one
private check clearing system.
If you’re interested in a country’s
payment systems, you can refer to the BIS
CPMI’s Redbook
which has details on the payment and settlement systems, e.g.,
securities of
its 27 member countries.
It also publishes data on volume and value of transactions in its
member countries available through BIS
Statistics.
But note this information comes with a 1 year lag. Preliminary data
for Year X is released in December Year X+1 with final figures
released generally during 1Q Year X+2.
HK has four such system under CHATS
(Clearing House Automated Transfer System):
- HKD (launched 1996)
- USD (launched August 2000)
- Euro (April 2003) and
- RMB (June 2007).
The RMB service was set up to facilitate the volume
of transactions between the HKSAR and Mainland China and later to
facilitate cross-border RMB payments because the Mainland’s
national payment system (CNAPS) (AKA “HVPS” in the BIS CPMI
reports) only accepts Chinese characters. That makes it difficult for foreign banks' payments to be processed because they must first be translated into Chinese.
Each of HK’s four RTGS
systems have a settlement institution (SI):
- HKD – Hong Kong Monetary Authority
- USD - Hong Kong Shanghai Bank HK
- Euro - Standard Chartered Bank HK
- RMB – Bank of China HK
Similar to other
systems—CHIPS or CIPS—there are two classes of
participants/members for CHATS HKD, USD, and Euros. RMB is handled differently as will be discussed.
- Direct Participants (DP) that hold accounts with the SI and are the only institutions that can input payment orders directly into the system and that receive credits from the system.
- Indirect Participants (IDPs) work through a DP with whom they have a correspondent account which the DP debits or credits. They do not have accounts with the SIs.
If the DPs are acting on behalf of
IDPs, they in turn debit or credit the correspondent accounts they
hold for the IDPs for transactions in CHATS.
All communications
between the DPs, HKICL, and the SIs are transmitted via SWIFT
as is currently the case with CIPS.
Banks outside of HK participate
in CHATS HKD, USD, and Euro systems but as IDPs, subject to approval
of the relevant SI and HKMA, except of course for HKD where the HKMA
is the SI.
Banks outside of HK may participate directly
in CHATS RMB by opening an account with the SI, BoC HK, subject to
approval by the SI and the HKMA. Note that difference.
Or
a master
list
here for all four currencies sorted by membership status and country.
This is quite useful as it shows the status of an individual bank’s
participation in each of the four currency CHATS as well as breaking
out banks by country.
Now
to the volume statistics.
I’ve prepared two charts.
- One for the USD and RMB.
- And a second for Euros.
Note the charts start in 2007 the year CHATS RMB began
service.
OECD
Statistics were
used for conversion of RMB and Euro clearing into USD equivalents.
Source of the actual clearing data is the HKMA's
Table T031201
from its Monthly Statistical Bulletin.
If you’re interested in
value of transactions from the year “dot”, you can refer to
T031201.
One further word of introduction. Well OK, more than one word. But that's what you'd expect from AA.
Typically, there are
two types of payments reflected in such statistics:
- Interbank Transactions – Settlement of FX and deposit placement transactions
- Customer Transactions – Commercial and personal payments
That’s almost certainly the case here.
Why?
CLS
International Bank
which is the primary global service for netting FX transactions do not
currently handle transactions denominated in RMB. As per the HK
CHATS participants list, CLSIB only appears to for HKD CHATS. It
does not appear as a member of the other CHATS currency clearing
arrangements.
If you’re wondering why netting FX transactions and
thus netting FX settlement risk is a “big deal”, take a look at
this article on Herrstatt
Bank
which brought this risk to the fore with a “crash”.
As
is clear from the above, RMB payments dwarf those in the USD.
For
the first four years after RMB CHATS was founded its volumes compared to USD CHATS were small. So small they don't show up in the chart above.
The USD equivalent of RMB payments was USD 5
billion, USD 22 billion, USD 14 billion, and USD 138 billion
respectively during those years.
In 2012 and 2015 RMB CHATS service extended its
operating hours and cutoff times to accommodate those Clearing
Members not in Hong Kong.
Of note is the fact that of the 209 RMB
Clearing Members 65 are banks outside of HK, mostly--but not all--branches of PRC
banks.
RMB CHATS also handles RMB check clearing and some securities
settlement services.
As for USD CHATS, yearly volumes seemed to
have reached a plateau at about USD 10 trillion. Compare that to the
USD 1.5+ trillion
processed by NY CHIPS each
business day
to get a sense of the relative HK CHATS position in global USD
clearing.
Another important point to note: USD clearing
transactions in HK take place on the books of HKSB Hong Kong. A USD
CHATS participant can use those funds to make a payment in USD CHATS.
However, if it wants to use its USD funds for a payment to a bank in
Europe or the USA, it’s very likely that that payment would
transmit NYC via CHIPS.
One other interesting factoid is that USD denominated credit card transactions for
(China) Union Pay International transit USD CHATS.
As mentioned above, Euro CHATS are not included in the above chart because the volumes are relatively small and really
wouldn’t show up.
So here's a separate chart.
In 2007 the USD equivalent of Euro clearing was
some USD 383 billion. Since then volumes
have decreased to around USD 100 billion.
Part
of the explanation is the number of participants as the chart below
shows.
HK CHATS PARTICIPANTS | ||||
HKD | USD | RMB | EUROS | |
DIRECT | 161 | 111 | 209 | 37 |
INDIRECT | NA | 86 | NA | 17 |
TOTAL | 161 | 197 | 209 | 54 |
There just doesn’t seem to be much interest in Euros among
HK and other Asian banks.
Clearly, there is
strong interest from around the world in CHATS RMB clearing with 209
Clearing Members (DPs), 65 of which are banks outside of HK. That
strong interest is reflected in the annual clearing volumes of RMB
through HK which currently dwarf those handled by CIPS.
No comments:
Post a Comment