Clearing House Automated Transfer System

Last updated

The Clearing House Automated Transfer System, or CHATS, is a real-time gross settlement (RTGS) system for the transfer of funds in Hong Kong. It is operated by Hong Kong Interbank Clearing Limited (HKICL), a limited-liability private company jointly owned by the Hong Kong Monetary Authority (HKMA) and the Hong Kong Association of Banks. Transactions in four currency denominations may be settled using CHATS: Hong Kong dollar, renminbi, euro, and US dollar. [1] In 2005, the value of Hong Kong dollar CHATS transactions averaged HK$467 billion per day, which amounted to a third of Hong Kong's annual Gross Domestic Product (GDP); the total value of transactions that year was 84 times the GDP of Hong Kong. [2] CHATS has been referred by authors at the Bank for International Settlements to as "the poster child of multicurrency offshore systems". [3] : 53 

Contents

History

Prior to the launch of CHATS as a RTGS system, interbank settlements in Hong Kong relied on a multi-tier system which settled on a daily net basis. About 170 banks settled with ten clearing banks. These ten banks, in turn, settled with Hongkong Bank, which then settled with the HKMA on a one-to-one basis. Hongkong Bank acted as the clearing house under this system, settling payments across its books on a net basis on the day following the transactions. The HKMA decided that this did not meet international standards as set by G10's Committee on Payment and Settlement Systems; following a six-month feasibility study, in June 1994, it decided to develop CHATS as an RTGS system. [4]

After two years of development, CHATS for Hong Kong dollars was launched on 9 December 1996. [5] CHATS for US dollars and euros were launched on 21 August 2000 and 28 April 2003, respectively. [6] [7] In July 2007, the Regional CHATS Payment Services was also launched to link all participants in the three different CHATS versions for transactions involving currency exchange. [8]

Features

CHATS, like other RTGS systems, settles payment transactions on a "real time" and "gross" basis—payments are not subjected to any waiting period and each transaction is settled in a one-to-one manner such that it is not bunched with other transactions. It is a single-tier system where participants settle with one central clearing house. Payments are final, irrevocable, and settled immediately if the participant's settlement account with the clearing house has sufficient funds. Daylight overdraft is not offered in CHATS; payments that cannot be settled due to insufficient funds are queued. Banks are able to alter, cancel, and re-sequence payments in their queues. [4] [5]

Banks can obtain interest-free intraday liquidity through repurchase agreements (repos). This prevents banks from having to maintain large balances in their settlement accounts, which accrue no interest, to cover their payments. Intraday repos that are not reversed at the end of the business day are carried into overnight borrowing. [4] [5]

To access RTGS system functions, banks must connect to the SWIFT network to initiate/receive payment instructions, and access eMBT provided by HKICL for performing administrative functions to respective payment instructions. [5]

Hong Kong dollar CHATS

The HKMA, which is Hong Kong's central banking institution, acts as the clearing house for Hong Kong dollar (HKD) CHATS. All licensed banks in Hong Kong maintain HKD settlement accounts with the HKMA, and as of June 2000, restricted license banks "with a clear business need" may also open settlement accounts with the HKMA. [5] The volume of transactions in HKD CHATS in 2007, in raw number of transactions, totaled at 5,499,494. [9] The total value of all transactions conducted in the same year was about HK$217 trillion. [10] As of 28 December 2015, there are 156 participating banks with HKD CHATS. [11]

US dollar CHATS

Unlike HKD CHATS, the clearing house for US dollar (USD) CHATS is a commercial bank, Hongkong and Shanghai Banking Corporation (HSBC). In addition to obtaining intraday repos for payment settlement, participating banks may also obtain intraday liquidity via an overdraft facility provided by HSBC. Banks in Hong Kong are not required to participate in USD CHATS; they may choose to join as direct participants or indirect participants. Direct participants maintain USD settlement accounts with HSBC for payment transactions in CHATS. Indirect participants must conduct their payment transactions through direct participants. Additionally, a membership category called Indirect CHATS Users exists where its banks also conduct their payment transactions through direct participants. [6] [12] The volume of transactions in USD CHATS in 2007, in raw number of transactions, totaled at 2,121,058. [13] The total value of all transactions conducted in the same year was about US$2,127 billion. [14] As of 28 December 2015, USD CHATS has 100 direct participant member banks, 24 indirect participant member banks, 87 Indirect CHATS User member banks, and eight Third Party User member banks. [12]

Euro CHATS

Euro CHATS is structured similarly to USD CHATS. Its clearing house is also a commercial bank, Standard Chartered Hong Kong. Participating banks may obtain intraday liquidity via an overdraft facility provided by Standard Chartered Bank. Like USD CHATS, banks in Hong Kong are not required to participate in Euro CHATS. Euro CHATS has two categories of membership, Direct Participants and Indirect CHATS Users; they function in the same manner as the categories in USD CHATS. [7] The volume of transactions in Euro CHATS in 2007, in raw number of transactions, totaled at 18,169. [15] The total value of all transactions conducted in the same year was about €280 billion. [16] As of 28 December 2015, Euro CHATS has 37 Direct Participant member banks and 18 Indirect CHATS User member banks. [17]

Renminbi CHATS

CHATS uses Bank of China (Hong Kong) as its clearing house for settling renminbi payments. Bank of China has a settlement account on the China National Advanced Payment System (CNAPS), allowing renminbi CHATS to effectively work as an extension of the Chinese system.

See also

Related Research Articles

The Hong Kong dollar is the official currency of Hong Kong. It is subdivided into 100 cents. Historically, it was also subdivided into 1000 mils. The Hong Kong Monetary Authority is the monetary authority of Hong Kong and the Hong Kong dollar.

The Hong Kong Monetary Authority (HKMA) is the central banking institution of Hong Kong. It is a government authority founded on 1 April 1993 when the Office of the Exchange Fund and the Office of the Commissioner of Banking merged. The organisation reports directly to the Financial Secretary.

Real-time gross settlement (RTGS) systems are specialist funds transfer systems where the transfer of money or securities takes place from one bank to any other bank on a "real-time" and on a "gross" basis to avoid settlement risk. Settlement in "real time" means a payment transaction is not subjected to any waiting period, with transactions being settled as soon as they are processed. "Gross settlement" means the transaction is settled on a one-to-one basis, without bundling or netting with any other transaction. "Settlement" means that once processed, payments are final and irrevocable.

The Australian financial system consists of the arrangements covering the borrowing and lending of funds and the transfer of ownership of financial claims in Australia, comprising:

In banking and finance, clearing refers to all activities from the time a commitment is made for a transaction until it is settled. This process turns the promise of payment into the actual movement of money from one account to another. Clearing houses were formed to facilitate such transactions among banks.

A payment system is any system used to settle financial transactions through the transfer of monetary value. This includes the institutions, payment instruments such as payment cards, people, rules, procedures, standards, and technologies that make its exchange possible. A payment system is an operational network which links bank accounts and provides for monetary exchange using bank deposits. Some payment systems also include credit mechanisms, which are essentially a different aspect of payment.

A linked exchange rate system is a type of exchange rate regime that pegs the exchange rate of one currency to another. It is the exchange rate system implemented in Hong Kong to stabilise the exchange rate between the Hong Kong dollar (HKD) and the United States dollar (USD). The Macao pataca (MOP) is similarly linked to the Hong Kong dollar.

<span class="mw-page-title-main">Fedwire</span> Real-time gross settlement by Federal Reserve Banks

Fedwire is a real-time gross settlement funds transfer system operated by the United States Federal Reserve Banks that allows financial institutions to electronically transfer funds between its more than 9,289 participants. Transfers can only be initiated by the sending bank once they receive the proper wiring instructions for the receiving bank. These instructions include: the receiving bank's routing number, account number, recipient’s name and dollar amount being transferred. This information is submitted to the Federal Reserve via the Fedwire system. Once the instructions are received and processed, the Fed will debit the funds from the sending bank's reserve account and credit the receiving bank's account. Wire transfers sent via Fedwire are completed the same business day, with many being completed instantly.

<span class="mw-page-title-main">Asian Clearing Union</span> International trade organization

The Asian Clearing Union (ACU) was established on December 9, 1974, at the initiative of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP). The primary objective of ACU, at the time of its establishment, was to secure regional co-operation regarding the clearing of eligible monetary transactions among the members of the Union to provide a system for clearing payments among the member countries on a multilateral basis.

TARGET2 was the real-time gross settlement (RTGS) system for the Eurozone from its phased introduction in 2007-2008 until its replacement with T2 in March 2023. As such, it was one of the Eurosystem's TARGET Services, replacing the original TARGET RTGS introduced in 1999. Like the other TARGET Services, it was developed and owned by the Eurosystem.

The Kazakhstan Stock Exchange is a stock exchange located in Almaty, Kazakhstan. The exchange was founded in 1993.

Payment and settlement systems are used for financial transactions in India. Covered by the Payment and Settlement Systems Act of 2007, legislated in December 2007, they are regulated by the Reserve Bank of India (RBI) and the Board for Regulation and Supervision of Payment and Settlement Systems.

A net settlement is a payment system used for inter-bank transactions. It is the process by which banks calculate the collective total of all transactions through designated times each day.

<span class="mw-page-title-main">CLS Group</span> Financial infrastructure group

CLS Group, or simply CLS, is a specialized financial market infrastructure group whose main entity is the New York-based CLS Bank. It started operations in 2002 and operates a unique and global central multicurrency cash settlement system, known as the CLS System, which plays a critical role in the foreign exchange market. Although the forex market is decentralised and has no central exchange or clearing facility, firms that chose to use CLS to settle their FX transactions can mitigate the settlement risk associated with their trades. CLS achieve this thanks to a central net and gross payment versus payment settlement service directly connected to the real-time gross settlement systems of participating jurisdictions through accounts at each of their respective central banks.

The Swiss Interbank Clearing (SIC) system is a mechanism for the clearing of domestic and international payments.

Since the late-2000s, the People's Republic of China (PRC) has sought to internationalize its official currency, the Renminbi (RMB). RMB internationalization accelerated in 2009 when China established the dim sum bond market and expanded Cross-Border Trade RMB Settlement Pilot Project, which helps establish pools of offshore RMB liquidity. The RMB was the 8th-most-traded currency in the world in 2013 and the 7th-most-traded in early 2014.

<span class="mw-page-title-main">Cross-Border Interbank Payment System</span> Financial markets payment system

The Cross-border Interbank Payment System (CIPS) is a Chinese payment system that offers clearing and settlement services for its participants in cross-border renminbi (RMB) payments and trade. CIPS is backed by the People's Bank of China and was launched in 2015 as part of a policy effort to internationalize the use of China’s currency.

<span class="mw-page-title-main">Faster Payment System</span> Real-time gross settlement payment system in Hong Kong

Faster Payment System is a real-time gross settlement payment system in Hong Kong that connects traditional banks and electronic payment and digital wallet operators. Users are able to perform instant money transfer or make payment to merchants by using the recipient's phone number, e-mail or QR code that contains the user's numeric identifier. Using the "traditional way" of full name and account number to make interbank transfer is also allowed.

<span class="mw-page-title-main">Automated clearing house</span> Type of electronic network for financial transactions

An automated clearing house (ACH) is a computer-based electronic network for processing transactions, usually domestic low value payments, between participating financial institutions. It may support both credit transfers and direct debits. The ACH system is designed to process batches of payments containing numerous transactions, and it charges fees low enough to encourage its use for low-value payments.

The China National Clearing Center is a public institution within the People's Bank of China that runs several of China's key financial market infrastructures.

References

  1. ↑ "Financial Services" (PDF). Information Services Department, Hong Kong SAR. November 2007. Retrieved 15 September 2008.
  2. ↑ "RTGS Payment Systems". Hong Kong Trade Development Council. 6 July 2006. Retrieved 15 September 2008.
  3. ↑ Morton Bech, Umar Faruqui & Takeshi Shirakami (March 2020), "Payments without borders" (PDF), BIS Quarterly Review
  4. 1 2 3 Norman T.L. Chan, Deputy Chief Executive of Hong Kong Monetary Authority (11 June 1997). "Hong Kong - CHATS". Hong Kong Monetary Authority. Retrieved 15 September 2008.
  5. 1 2 3 4 5 "Real Time Gross Settlement System". Hong Kong Interbank Clearing Limited. Retrieved 22 January 2016.
  6. 1 2 "USD Clearing System in Hong Kong". Hong Kong Interbank Clearing Limited. Archived from the original on 18 September 2008. Retrieved 15 September 2008.
  7. 1 2 "Euro Clearing System in Hong Kong". Hong Kong Interbank Clearing Limited. Archived from the original on 18 September 2008. Retrieved 15 September 2008.
  8. ↑ "News in 2007". Hong Kong Interbank Clearing Limited. Archived from the original on 18 September 2008. Retrieved 15 September 2008.
  9. ↑ "Statistics of HKD Clearing Transaction Volume". Hong Kong Interbank Clearing Limited. Archived from the original (PDF) on 12 April 2007. Retrieved 15 September 2008.
  10. ↑ "Statistics of HKD Clearing Transaction Value". Hong Kong Interbank Clearing Limited. Archived from the original (PDF) on 26 April 2010. Retrieved 15 September 2008.
  11. ↑ "List of HKD Clearing Members as of 28 December 2015". Hong Kong Interbank Clearing Limited. Archived from the original (PDF) on 4 March 2016. Retrieved 13 January 2016.
  12. 1 2 "List of USD Clearing Participants as of 28 December 2015". Hong Kong Interbank Clearing Limited. Archived from the original (PDF) on 4 March 2016. Retrieved 13 January 2016.
  13. ↑ "Statistics of USD Clearing Transaction Volume". Hong Kong Interbank Clearing Limited. Archived from the original (PDF) on 12 April 2007. Retrieved 15 September 2008.
  14. ↑ "Statistics of USD Clearing Transaction Value". Hong Kong Interbank Clearing Limited. Archived from the original (PDF) on 26 April 2010. Retrieved 15 September 2008.
  15. ↑ "Statistics of Euro Clearing Transaction Volume". Hong Kong Interbank Clearing Limited. Archived from the original (PDF) on 11 April 2007. Retrieved 15 September 2008.
  16. ↑ "Statistics of Euro Clearing Transaction Value". Hong Kong Interbank Clearing Limited. Archived from the original (PDF) on 12 April 2007. Retrieved 15 September 2008.
  17. ↑ "List of Euro Clearing Participants as of 28 December 2015". Hong Kong Interbank Clearing Limited. Archived from the original (PDF) on 19 September 2015. Retrieved 13 January 2016.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.