More than 60% of FX trades face Herstatt risk – BIS study
Only around a third of transactions fully eliminate settlement risk by using PvP
Some 64% of currency trades face the risk that one leg of the settlement will fail to complete and thereby inflict losses on the parties involved, analysis by the Bank for International Settlements has found.
Such a possibility is often known as Herstatt risk, after Bankhaus Herstatt, a West German lender that collapsed in 1974. The West German authorities shuttered the bank at 3.30pm Frankfurt time, when local markets were closed but New York’s were still open. Several of the bank’s
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