The Hong Kong Monetary Authority and the banking community both have a part to play in ensuring the Real Time Gross Settlement, or RTGS, payment systems continue to operate efficiently, says Monetary Authority Chief Executive Joseph Yam.

In his weekly column Viewpoint, Mr Yam noted the authority is already reviewing whether the system needs to be strengthened and will work closely with banks who use the system to their benefit - generating the heavy traffic.

The banks will need to look at their own capacity and capability to make sure they can handle heavy traffic, too.

"As payment gridlocks can make financial traffic go elsewhere permanently, we must work together to maintain the record of zero settlement failure in our RTGS payment systems," he noted.

The RTGS is used to facilitate the flow of funds in different currencies among banks in Hong Kong. The one with the heaviest traffic is the Hong Kong dollar RTGS system. It saw HK$467 billion worth of transactions settled each day on average in 2005.

HKD traffic on the rise

Mr Yam said Hong Kong dollar traffic among licensed banks here has also been increasing at a rate of 13% a year in the past three years.

The main factors contributing to this rapid increase are Hong Kong's expanding role as an international financial centre and the economic recovery.

When there is a large initial public offering, the traffic volume shoots up, sometimes by as much as three times.

He gave the recent Bank of China IPO as an example. The amount settled on June 1, the first trading day when there was also a lot of refund money going through, was HK$1.23 trillion - almost 90% of the annual GDP and a record amount settled on one day through the Hong Kong dollar RTGS system.

Management foresight

Mr Yam said the smooth operation of RTGS requires foresight in management, technical expertise on the part of the financial architects and engineers, and dedication on the part of system operators.

"There is also a great deal of initiative involved, in contingency planning and in invoking special arrangements when circumstances require," he added.