BIS releases FX systemic risk report

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BASEL – The Bank for International Settlements (BIS) has released a report on the progress made in reducing the systemic risks on foreign exchange (FX) settlement caused by central banks’ large exposures to counterparties, overnight settlement times, inadequate controls and poor understanding of the risks involved.

The report says there has been a great reduction in all these risk areas – touting in particular the founding and growth of CLS Bank, which now settles $3 trillion a day in FX payment obligations a day. The Bank says, however, that many FX settlements still harbour systemic risks and additional action is necessary.

The document is the result of a strategy launched by the G-10 central banks in 1996 after it was found that systemic risk controls in all these areas were lacking. A consultation period was launched in July 2007.

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