Ms. Monstrey, Executive Director of Board of Euroclear,
Mr. Lin, Commissioner of the Financial Supervisory Commission (FSC),
Chairman Ding of the Taiwan Depository & Clearing Corporation (TDCC),
Chairman Kuan of Citibank Taiwan,
Distinguished Guests, Ladies and Gentlemen,

Good morning!
First of all, on behalf of the Central Bank of R.O.C. (Taiwan), I’d like to congratulate the TDCC on the successful collaboration with Euroclear and Citibank to launch international bond clearing and settlement services.
As we all know, Euroclear is the largest international central securities depository (ICSD) in the world. Today, through a partnership with its agent bank, Citibank, it has linked up with the TDCC. This new mechanism integrates Taiwan into the back-office operations of international capital markets, providing a more convenient and efficient settlement platform to invest in Taiwan’s foreign currency bond market. It will facilitate the development of international bond business in Taiwan, particularly the fledgling Formosa bonds. As foreign investors are now able to directly access international bonds offered in Taiwan, we expect the market will grow further in size.
Price and financial stability are two of the major policy objectives of the Central Bank, and a sound payment and settlement system is essential to policy implementation. The Central Bank has been dedicated to building safe and efficient payment and settlement systems. Especially in the past few years, we have worked with many institutions and carried out a series of reforms to securities clearing and settlement services. Allow me to briefly retrace these developments that, in a sense, serve as the precursor of the fruit of collaboration we celebrate today.
In the early stage of Taiwan’s bills and bond markets, transactions were processed manually, with bill/bond delivery and funds settlement performed separately. Such a mechanism not only lacked efficiency but also presented settlement risks. That was why book-entry issuance was introduced in 1997. Moreover, a task force was set up in 1999, comprising the Ministry of Finance, the Central Bank, and the bills finance industry. Thanks to their efforts, the Bills Central Depository and Clearing System was launched, and by linking this System with the Central Bank’s Interbank Funds-Transfer System (CIFS), a delivery-versus-payment (DVP) mechanism was implemented. Meanwhile, automated processing of settlements was introduced. The progress has effectively increased safety and efficiency of bills transaction settlement.
The TDCC is also the child of similar reform efforts, born in 2006 after the merger of the Taiwan Securities Central Depository Co. and the Debt Instruments Depository and Clearing Co. The TDCC has since been dedicated to establishing a more efficient back-office system for bond settlement. As a result, transactions involving corporate bonds, financial bonds, and local government bonds can be settled in the CIFS on a DVP basis. The TDCC currently handles a daily average volume of NT$330 billion for bills and bond DVP settlements. It has become one of the key settlement systems in this country.
Aside from the above-mentioned types of bonds, transactions of central government bonds also became more efficient. In 2008, the Central Bank further linked the Central Government Securities Settlement System with the CIFS, enabling DVP settlement for book-entry central government bonds and treasury bills. With these reforms, the securities settlement system in Taiwan’s financial market has become fully compliant with the BIS principles, as Taiwan has strengthened risk management for and improved efficiency of large-value settlements.
In fact, the reform efforts did not stop at local currency payment and settlement systems. In 2012, the Central Bank responded to the needs for cross-strait RMB clearing and mapped out a foreign currency clearing platform, to be constructed by the Financial Information Service Co. (FISC). The new platform will link up with domestic clearing banks for the USD, RMB, etc., thereby facilitating foreign currency clearing and settlement.
At present, clearing and settlement services for domestic and cross-strait USD and RMB remittances are available on this platform. It also allows banks to conduct USD/NTD spots, forwards, and swaps on a payment-versus-payment (PVP) basis, facilitating simultaneous settlements of payments in two different currencies. In addition, we are in the process of selecting clearing banks for the yen and the euro, two currencies soon to be added to the platform. We also plan on connecting this platform with the TDCC system and implement a DVP mechanism for foreign currency securities.
Today, as we welcome Euroclear’s participation in Taiwan’s international bond market, we are also moving toward another milestone of DVP settlement for foreign currency securities. After the foreign currency clearing platform is linked up with the TDCC system, it will also be connected with Euroclear’s services to provide DVP settlement for international bonds. This significant development will not only facilitates foreign investment in Taiwan’s capital market but also paves way for a diversified, multi-currency, internationalized financial market here in Taiwan.
Systemically important payment systems, central securities depositories, and securities settlement systems are all key infrastructures of the financial market. Therefore, the BIS Committee on Payment and Settlement Systems (CPSS) and the International Organization of Securities Commissions (IOSCO) formulated the Principles for Financial Market Infrastructures in April 2012. The Central Bank will also base its efforts upon such international principles and work with relevant parties for the betterment of payment and settlement systems in Taiwan. We hope that with enhanced systems, Taiwan will be highly responsive to the changing financial markets and technological advances, and its domestic securities market will keep deepening and growing.
It is your continuous dedication that has helped Taiwan to develop a stable financial market. On behalf of the Central Bank Governor, Mr. Perng, I’d like to express our thanks to you and wish you good health and success. Thank you!