Abstract

http://ssrn.com/abstract=253695
 
 

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The CLS Bank: A Solution to the Risks of International Payments Settlement?


Charles M. Kahn


University of Illinois, Urbana-Champaign

William Roberds


Federal Reserve Bank of Atlanta


Carnegie-Rochester Conf. Series on Public Policy

Abstract:     
Foreign exchange transactions are subject to a unique type of settlement risk. This risk ultimately stems from the difficulty of coordinating separate settlements in two different currencies. Settlement of foreign exchange transactions through the proposed CLS ("Continuous Linked Settlement") Bank has been discussed as a potential solution to this problem. This paper describes the CLS proposal and analyzes the incentives it places on banks engaged in foreign exchange transactions. The analysis shows that while settlement through the CLS Bank may represent an improvement over current arrangements, some important problems associated with foreign exchange settlements will remain.

Keywords: Foreign exchange, settlement risk

JEL Classification: G20, F31

Accepted Paper Series


Not Available For Download

Date posted: February 1, 2001  

Suggested Citation

Kahn, Charles M. and Roberds, William, The CLS Bank: A Solution to the Risks of International Payments Settlement?. Carnegie-Rochester Conf. Series on Public Policy. Available at SSRN: http://ssrn.com/abstract=253695

Contact Information

Charles M. Kahn
University of Illinois, Urbana-Champaign ( email )
Department of Finance
340 Wohlers Hall
Champaign, IL 61820
United States
217-333-2813 (Phone)
HOME PAGE: http://kahnfrance.com/cmk/
William Roberds (Contact Author)
Federal Reserve Bank of Atlanta ( email )
1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States
404-498-8970 (Phone)
404-498-8956 (Fax)
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