Euro Clearing System in Hong Kong

Following the launch of USD clearing in August 2000, the Euro clearing was introduced on 28 April 2003.  The Hong Kong Monetary Authority (¡§HKMA¡¨) appointed Standard Chartered Bank (Hong Kong) Limited as the Settlement Institution (¡§SI¡¨) for the Euro clearing system in Hong Kong.  The system would further enhance settlement efficiency and reduce settlement risk in the Asian time zone.

The key functions for the Euro clearing system are as follows:

Euro Real Time Gross Settlement
Payment versus Payment for foreign exchange transactions between the EUR/USD, EUR/HKD and EUR/CNY
Delivery versus Payment for EUR denominated debt securities through a linkage with Central Moneymarkets Unit

The Euro SI is a commercial bank providing an interest-free intraday overdraft facility to the Euro direct participants.  Each Euro direct participant has to open and maintain a settlement account with the Euro SI and Euro transactions are settled across the books of the Euro SI.  Euro direct participants can obtain interest-free intraday liquidity through (i) overdraft facility provided by the Euro SI, or (ii) intraday repo arrangement by pledging the Exchange Fund Bills and Notes or other eligible debt securities to the Euro SI as collaterals.

The participation in Euro clearing system is not mandatory.  Banks in Hong Kong are free to join the system as direct participants or indirect participants.  Other institutions which have been permitted by the Euro SI and the HKMA may also join the Euro clearing system.

All Euro on-line transactions are settled real time on a gross basis and are across the books of the Euro SI.  The settled payments are final and irrevocable.