Manfred Wiebogen President ACI, The Financial Markets Association
Manfred Wiebogen President ACI, The Financial Markets Association

Managing risks associated with the settlement of foreign exchange transactions

Last time I drew your attention to ACI’s update of The Model Code – formulating a new benchmark of FX Best Practices. At its Executive Board meeting on September 4th in Paris, the Committee for Professionalism published the final version of the International Code of Conduct and Practice for the Financial Markets. This version will now become merchandised and distributed to relevant authorities to recall the association’s initiatives in the OTC markets for decades.

Supervisory guidance for foreign exchange transactions Today I want to inform you of an initiative from the Basel Committee. Since the BCBS’s Supervisory guidance for managing settlement risk in foreign exchange transactions (2000) was published, the foreign exchange market has made significant strides in reducing the risks associated with the settlement of FX transactions. Substantial FX settlement-related risks remain, however, not least because of the rapid growth in the FX trading. The Basel Committee published a consultative document with the aim to review and update the last supervisory guidance in order to ensure that such risks are properly managed: it will provide a more comprehensive and detailed view on governance arrangements and the management of principal risk, replacement cost risk and all other FX settlement-related risks. In addition, it promotes the use of payment-versus-payment arrangements, where practicable, to reduce principal risk. The reviewed guidance is organized into...continued

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