Settlement risk has been greatly reduced but not yet eliminated, Monetary Authority Chief Executive Joseph Yam says, adding there is still a lot of hard work ahead in achieving the ultimate goal of making settlement risk a historical term and to avoid the risk of backsliding.

In his Viewpoint column today, Mr Yam said the authority has made a lot of effort over the years to help banks in Hong Kong reduce their settlement risk as far as possible by improving interbank payment infrastructure.

"Our aim is to build the most advanced and reliable multi-currency, multi-dimensional platform to provide real-time, payment-versus-payment and delivery-versus-payment services to users."

He said the first real-time gross settlement system in Hong Kong for transactions denominated in Hong Kong dollars was introduced in 1996. In 2006 the Hong Kong dollar settlement system handled transactions involving $579 billion each day. On October 27 last year the system registered a record turnover of $1.37 trillion because of large initial public offerings.

Building on the success of the Hong Kong dollar settlement system, the authority introduced the US dollar and euro settlement systems in 2000 and 2003. In June this year the renminbi settlement system was introduced. These four systems are linked so users can enjoy multi-and single-currency real-time payment-versus-payment services in Hong Kong.

But the hard work of financial infrastructure development does not end there, he said.

"Put simply, our aim is to make Hong Kong a place for financial institutions, and indeed anyone, active in the foreign currency markets to do business without having to worry about settlement risk.