Template-Type: ReDIF-Article 1.0
Author-Name: Marc Glowka
Author-Name: Thomas Nilsson 
Title: FX settlement risk: an unsettled issue
Abstract: FX settlement risk, the risk that one party to a currency trade fails to deliver the currency owed, can result in significant losses and undermine financial stability. Netting and payment versus payment (PvP) mechanisms help to mitigate this risk. However, almost a third of deliverable FX turnover, or $2.2 trillion, was still at risk on any given day in April 2022, up from $1.9 trillion in April 2019. Settlement risk remains because existing PvP arrangements are unavailable, or unsuitable for certain trades, or market participants find them too expensive. Ongoing policy initiatives and private sector innovation aim to encourage PvP adoption for more currencies and market participants.
Journal: BIS Quarterly Review
File-URL: http://www.bis.org/publ/qtrpdf/r_qt2212i.pdf
File-Format: Application/pdf
File-URL: http://www.bis.org/publ/qtrpdf/r_qt2212i.htm
File-Format: text/html
Year: 2022
Month: December
Classification-JEL: E42, F31, G15
Handle: RePEc:bis:bisqtr:2212i