How to Fix a $2.2 Trillion FX Risk After 50 Years of Trying
Technology may finally offer a solution to the threat of settlement failures that faces financial institutions every day.
Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services in Asia. Previously, he worked for Reuters, the Straits Times and Bloomberg News.
Who’s got the key?
Photographer: Yuichiro Chino/Moment RF via Getty Images
It’s finally time to move on from a $2.2 trillion problem by burying Bankhaus Herstatt — a half-century after its collapse.
On June 26, 1974, before the opening of the New York money market, liquidators swooped in and closed down the Cologne-based midsized lender before it could release the dollars for all the currency trades in which it had already received deutsche marks. The ensuing chaos on both sides of the Atlantic led to the creation of the Basel Committee on Banking Supervision. But the so-called Herstatt risk, in which one party is left holding a claim after it has discharged its obligations, has lived on.
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How to Fix a $2.2 Trillion FX Risk After 50 Years of Trying