The Hong Kong Monetary Authority (HKMA) in collaboration with the Bank of Thailand (BOT) unveiled a new cross-border payment-versus-payment (PvP) link to facilitate real time gross settlement between US dollar and Thai baht.

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HKMA noted that the PvP link will eliminate settlement risk in foreign exchange transactions between the US Dollars and Thai Baht by ensuring the simultaneous delivery of US Dollars in Hong Kong and Thai Baht in Thailand.

In addition, the Thai banks will be able to better manage 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 hours.

It will also enable banks in Hong Kong to tap new correspondent banking opportunities of serving banks in Thailand.

In Thailand, the link is operated by BOT and in Hong Kong by Hong Kong Interbank Clearing Limited (HKICL). It is equally owned by the HKMA and the Hong Kong Association of Banks.

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The Hong Kong Monetary Authority deputy chief executive Peter Pang said: "This new PvP link provides a safer and more efficient arrangement for settling foreign exchange transactions."

Bank of Thailand deputy governor (financial institutions stability) Krirk Vanikkul said: "BOT believes that the PvP infrastructure will help enhance the capability of Thai banks to settle US Dollars and Thai Baht in real-time Payment versus Payment.

"Participating banks will have a secure platform to manage their foreign exchange settlement risk which leads to the risk mitigation in the banking system.

"This new link also promotes the efficiency and credibility of payment systems in Thailand by having reliable payment infrastructure in line with international standard."