Singapore Receives In-Principle Agreement to Participate in Global CLS System
Singapore, 18 Oct 2001. The Monetary Authority of Singapore (MAS) has today announced that it has received in-principle agreement from CLS Group and CLS Bank International (CLS Bank) to include the Singapore Dollar as an eligible currency of CLS Bank. By participating in CLS, Singapore joins the G10 central banks in their effort to reduce foreign exchange (FX) settlement risk worldwide.
2 The in-principle agreement is a result of industry efforts to reduce FX settlement risks, with MAS' support. In July 2001, MAS published a report on FX settlement risk practices in Singapore, highlighting that interbank exposures arising from current settlement practices could be significant. Market participants have been keen to pursue FX settlement risk reduction measures, and in particular, to participate in CLS. MAS welcomes the industry's initiatives, and is working closely with the financial institutions to help put in place the necessary arrangements for the smooth implementation of CLS in Singapore.
3 "A large proportion of Singapore Dollar trades are against the major currencies such as US$, Yen and European currencies. Singapore's inclusion in CLS will greatly reduce the FX settlement exposures for our market
participants. This is important as a sound and progressive management of credit and liquidity risks is critical to the stability and competitiveness of any financial system," said Mr Enoch Ch'ng, Executive Director of MAS' Market Infrastructure and Risk Advisory Department. "MAS is thus supportive of the moves and will make the necessary market infrastructure enhancements to enable players to participate effectively in CLS," Mr Ch'ng added.
4 The Singapore Dollar will join the Australian Dollar, Canadian Dollar, Danish Kroner, Euro, Japanese Yen, Norwegian Krone, Pound Sterling, Swedish Krona, Swiss Franc and United States Dollar as prospective CLS Bank eligible currencies. As with all other currencies, the inclusion of the Singapore Dollar will be formalised on completion of a full due diligence process and when the technical implementation is achieved. According to CLS, it is projected that the Singapore Dollar will become fully eligible by early 2003.
5 "CLS presents the industry an opportunity to improve their business and technical infrastructures. This will pave the way for value-added, risk-reduction services in Singapore and the region. As one of the largest FX trading centres in the world, Singapore's participation reinforces our position as a key node in the global financial system," commented Ms Teo Swee Lian, Assistant Managing Director of MAS.
1 More information can be found in the reports "Settlement Risk in Foreign Exchange Transactions" (1996) and "Reducing Foreign Exchange Settlement Risk : A Progress Report" (1998) by the Committee on Payment and Settlement Systems, Bank for International Settlements (BIS)
Note to Editor:
'Continuous Linked Settlement' (CLSTM) is a process that enables two legs of a cross-currency transaction to be settled simultaneously. Representing a significant shift in the way cross border settlement has been done for centuries, it is a real-time, global settlement system that eliminates the settlement risk caused by delays arising from time-zone differences.
The continuous linked settlement service will be offered by CLS Bank International (CLS Bank), a "bankers' bank" that will provide a new global infrastructure for multi-currency payment clearing and settlement services, initially in foreign exchange.
CLS Group now has 70 shareholders.
Together they account for a substantial majority of the cross-currency transactions across the globe and have invested more than $300 million to develop the settlement service.
CLS Bank is based in New York, regulated as a bank by the Federal Reserve Bank of New York, and is a wholly owned subsidiary of CLS Group Holdings, incorporated as CLS Services Ltd., a UK private company based in London.
CLSTM is a trademark of CLS Group Holdings (incorporated as CLS Services Ltd.)