ASEAN, 3 Partners Eye Linking Fund, Securities Settlement Systems

Manila, March 25 (Jiji Press)--Association of Southeast Asian Nations members and their three dialogue partners are considering interconnecting their systems to allow simultaneous settlements of funds and securities across borders, Jiji Press learned Tuesday. The move is expected to accelerate securities transactions further in the 10 ASEAN members plus Japan, China and South Korea, financial sources in Asia said. They aim to directly link fund settlement systems at their central banks, which consist of financial institutions' current accounts, with securities settlement systems in each country. If realized, Japanese financial institutions will find it more effective and safer to make settlements, such as selling Japanese government bond holdings in their accounts with the Bank of Japan to overseas financial institutions and procuring foreign currency as collaterals. Reflecting JGBs' high creditworthiness, there is abundant need for them for use in asset management and as collateral. Meeting such needs overseas through the interconnection will smooth the way for Japanese financial institutions to procure foreign currency through the use of their JGB holdings. Asian economies have different rules on whether securities settlement systems are within central banks. For example, financial institutions in Japan and Hong Kong have their securities and fund settlement systems at their central banks. Head offices of Japanese banks and Tokyo branches of major banks from Hong Kong have their own JGB accounts with the BOJ while Hong Kong branches of Japanese banks and head offices of banks from Hong Kong have their fund accounts with Hong Kong's central bank. This means that the proposed interconnection will enable simultaneous transfers of JGBs and funds between financial institutions. Japanese banks are hoping for similar links with the United States and Europe to make it easier to procure foreign currencies there by putting up JGBs as collateral. END