The Hong Kong Monetary Authority (HKMA) and Bank Negara Malaysia announced Monday that the new cross-border payment-versus-payment (PvP) link between Hong Kong's U.S. Dollar real time gross settlement (RTGS) system and Malaysia's Ringgit RTGS system was launched.

The link, which started operation on Monday, will eliminate settlement risk in foreign exchange transactions between the U.S. Dollars and Malaysian Ringgit by ensuring the simultaneous delivery of U.S. Dollars in Hong Kong and Ringgit in Malaysia. This is the first cross-border PvP link established in Asia.

On Dec. 8, 2005, the HKMA and Bank Negara Malaysia signed a Memorandum of Understanding on the establishment of the PvP link. Following the completion of system development and testing, the link went live on schedule on Monday.

The link is operated in Malaysia by Bank Negara Malaysia and in Hong Kong by Hong Kong Interbank Clearing Limited, which operates the interbank clearing systems in Hong Kong, and is jointly and equally owned by the HKMA and the Hong Kong Association of Banks.

Chief Executive of the HKMA Joseph Yam said, "The link between the U.S. Dollar RTGS system in Hong Kong and the Ringgit RTGS system in Malaysia is the first cross-border PvP link between two RTGS systems for two different currencies in the region.

"Link of this nature provides a safer and more efficient payment flow and enhances monetary and financial stability by eliminating settlement risk arising from the delivery of different currencies in different time zones." he said.

Source: Xinhua