FX settlement risk: an unsettled issue

Marc Glowka and Thomas Nilsson

BIS Quarterly Review, 2022

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.

JEL-codes: E42 F31 G15 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.bis.org/publ/qtrpdf/r_qt2212i.pdf (application/pdf)
http://www.bis.org/publ/qtrpdf/r_qt2212i.htm (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bis:bisqtr:2212i

Access Statistics for this article

BIS Quarterly Review is currently edited by Christian Upper

More articles in BIS Quarterly Review from Bank for International Settlements Contact information at EDIRC.
Bibliographic data for series maintained by Martin Fessler ().