The Hong Kong Monetary Authority (HKMA) and Bank of Thailand (BOT) have jointly launched a new cross-border payment-versus-payment (PvP) link between Hong Kong's US dollar real time gross settlement (RTGS) system and Thailand's Thai Baht RTGS system (BAHTNET).

This link is the third cross-border PvP link in Asia for HKMA's RTGS system, said Peter Pang, deputy chief executive of the HKMA. The other two existing links are with Malaysia and Indonesia, he added.

According to a joint press statement by the central banks, the PvP link will eliminate settlement risk in foreign exchange transactions between US dollars and Thai Baht by ensuring the simultaneous delivery of US dollars in Hong Kong and Thai Baht in Thailand.

Participating banks in Thailand will thus be able to better manage their counterparty risks arising from US Dollar-Thai Baht foreign exchange transactions and enhance their operational efficiency in settling those transactions in a coordinated manner during Asian trading hours. Since the new link provides a reliable payment infrastructure in line with international standards, it also helps "promote [the] credibility of the payment systems in Thailand," added Krirk Vanikkul, BOT's deputy governor of Financial Institutions Stability.

As for banks in Hong Kong, the new link opens new correspondent banking opportunities of serving banks in Thailand for them, according to the press statement.

Currently in operation, the PvP link is managed by the BOT in Thailand and Hong Kong Interbank Clearing Limited (HKICL), which is equally owned by the HKMA and the Hong Kong Association of Banks, in Hong Kong.