CLS for You
Over 3,000 funds, banks, and corporates use CLS Settlement to eliminate risk and derive greater operational efficiency. The increased focus on risk in the current climate means that settlement and operational risk has once again become a primary focus, to a potentially unprecedented level.
Counterparty risk used to be the subject of bi-annual reviews but it has now become a daily activity for senior managers. The regulatory community is re-invigorating its efforts to drive the industry towards further improvement and the adoption of more stringent standards.
Settlement risk numbers dwarf any other risk category in many institutions. In some cases, large banks have almost three times more exposure to settlement risk than to credit risk. In FX, the largest market by value, transactions can involve settlement exposures amounting to tens of billions of dollars each day to individual counterparties and in some cases, exposure to a single counterparty exceeds that institution’s capital.
The Bank of International Settlements Committee of Payments and Settlement Systems (CPSS) published its final report entitled Progress in reducing foreign exchange settlement risk (http://www.bis.org/publ/cpss83.htm) in May 2008, which renewed the focus on foreign exchange settlement risk reduction and also commended a payment versus payment architecture. Reflecting the increasing recognition of foreign exchange as an asset class, the report highlights the changing composition of the market with a growing number of “buy-side” participants accounting for a higher proportion of daily values. There is now increasing pressure on other non-bank participants in the FX market to address the case for greater control and oversight of settlement risk. CLS Settlement is the best way for these institutions to address these risk issues.
Any institution or fund that trades either directly or indirectly in the six instruments covered by CLS Settlement can derive the risk and efficiency benefits of CLS Settlement by using a CLS service provider.
There are over 20 CLS service providers. These are CLS Bank Members that offer CLS Settlement as a service to other institutions.
Click on the appropriate link above to discover how CLS Settlement can benefit your organisation, as well as specific information on the practical steps you need to take to get started and links to service providers. Alternatively you can contact CLS to discuss your needs in detail.