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Definition of foreign exchange settlement exposure
Potential impact of improving practices
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46. The survey indicated that a bank's FX settlement practices can greatly influence the size of its exposures. One way a bank can lower its exposure is by changing the timing of its unilateral payment cancellation deadlines and of its identification of final and failed receipts. Another way is by legally binding netting of the settlement obligations arising out of its FX trades rather than settling each trade individually.
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Risk Library *
Documents by Author *
Committees at the Bank for International Settlement (BIS) *
Settlement Risk in Foreign Exchange Transactions *
Appendix 1 *
Definition of foreign exchange settlement exposure
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