Settlement risk in foreign exchange transactions

Release date
01/09/1997
Reference
Vol. 60. No. 3. September 1997
Author
Ian Harrison
In this article, Ian Harrison of the Banking System Department discusses the credit risks banks can be exposed to when they settle foreign exchange transactions. The article draws on a report by the Committee on Payment and Settlement Systems of the central banks of the Group of Ten countries, which showed that these exposures can last for longer than was commonly understood, and applies the Committee’s methodology to the New Zealand foreign exchange market.