To boost use of the system during the first month, HSBC has said it will waive fees on euro clearing transactions.
Becoming a direct participant in Hong KongÆs local euro clearing system complements HSBC's existing US dollar and renminbi systems and comes about a year after the bank was reappointed settlement institution (SI) in Hong Kong. A settlement institution is a bank that provides settlement accounts to the participants and to any central counterparty in the system for the settlement of transfer orders within the system and, as the case may be, for extending credit to such participants and any such central counterparty for settlement purposes.
With the local US dollar clearing system, of which is HSBC is also a major clearing member, the functionalities feature local and cross-border clearing into Guangdong Province, including Shenzhen.
With renminbi clearing, HSBC offers cheque clearing services for renminbi cheques drawn on banks in Hong Kong and Guangdong Province. It also offers renminbi remittances and renminbi bank card payments.
The approval comes as the Hong Kong Monetary Authority (HKMA) aims to further eliminate foreign exchange risk arising from time zone differences.
The Hong Kong financial body uses Standard Chartered as SI for the SAR's euro clearing system and will choose whether to renew the contract after 2008. Although not mandatory, most banks will maintain a settlement account with Standard Chartered, which settled all euro transactions across its own euro book.
Key functions of Hong Kong's euro clearing system include euro real time gross settlement, payment versus payment foreign exchange between the EUR/USD and EUR/HKD and delivery versus payment for euro-denominated debt securities through a linkage with Central Moneymarkets Unit, the clearing system operated by the HKMA.