The CLS Bank: a solution to the risks of international payments settlement?
Foreign exchange transactions are subject to a unique type of settlement risk. This risk ultimately stems from the difficulty of coordinating separate settlements in two different currencies. Settlement of foreign exchange transactions through the proposed CLS (“Continuous Linked Settlement”) Bank has been discussed as a potential solution to this problem. This paper describes the CLS proposal and analyzes the incentives it places on banks engaged in foreign exchange transactions. The analysis shows that while settlement through the CLS Bank may represent an improvement over current arrangements, some important problems associated with foreign exchange settlements will remain.
|Date of creation:||2000|
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- James T. Moser, 1994. "Origins of the modern exchange clearinghouse: a history of early clearing and settlement methods at futures exchanges," Working Paper Series, Issues in Financial Regulation 94-3, Federal Reserve Bank of Chicago.
- Richard K. Lyons., 1997. "Profits and Position Control: A Week of FX Dealing," Research Program in Finance Working Papers RPF-273, University of California at Berkeley.
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