The Bank now has responsibility for end-to-end risk management for CHAPS including relationships with CHAPS direct participants, and clearer lines of responsibility and integrated governance, enhancing financial stability in the UK. The first glimpse of the new dawn: ISO 20022 – improving payment messaging June next year will be the first step in the UK’s migration to ISO 20022. Its implementation is a foundational step that will enable many of the future changes that are coming, both domestically in the renewal of RTGS and internationally including enhancing cross border payments. Payment messages are the vehicles for transactional data in the payments world. They provide a common data model and a set of rules for exchanging critical information for a transaction to take place for everything from consumer payments to corporate treasury operations. Increasingly used by payment systems across the world, many other key Payment System Operators are also on the journey to implement ISO 20022 including the ECB’s TARGET2 and the Federal Reserve’s Fedwire. In addition, starting in late 2022 SW IFT’s correspondent banking network will retire the use of the existing MT standard by November 2025 and mandate ISO 20022. ISO 20022 will bring enhanced data deliver significant long-term benefits for not only the UK’s payment systems but participants and their customers. It provides flexibility to adapt to changes in the economy, emerging technologies and innovation. It provides international harmonisation, supporting cross-border payments.
The northbound Stock Connect has presented a huge opportunity for Hong Kong to develop risk management capability for understanding of the risks and the pricing of such risks for offshore investors interested in the A share markets. Apart from helping to channel foreign investments into the Mainland market, the Stock Connect has also contributed to the inclusion of bigger weights of A shares in the global stock market indices such as the MSCI. Asian Equity Derivatives Hub 8. Another recent trend that is relevant is that several international financial firms have decided or are planning to relocate their Asian equities derivatives booking hubs from Europe to Asia. This is very logical as the underlying securities and clients are based in Asia. The HKMA welcomes these moves and stands ready to facilitate such moves, on the condition that the booking business must be accompanied by the necessary risk management functions. Again, this will enhance Hong Kong’s position as the risk management hub for Asian equities and derivatives, particularly Mainland related stocks. Bond Connect 9. By the same token, the launch of the northbound Bond Connect in 2017 has opened another window of opportunity for Hong Kong to enhance its risk management functions for offshore investors wishing to invest in the Mainland bond market. It is still early days yet, but I am confident that Bond Connect offers attraction to those investors who prefer using a nominee holding structure through the Central Moneymarkets Unit of the HKMA.