Continuous Linked Settlement (CLS) is a private sector response to increasing regulatory pressure to reduce foreign exchange settlement risk exposures. The initiative is sponsored by the Group of Twenty (G20) commercial banks and endorsed by the G10 central banks and lead regulators. The primary objectives of CLS are to eliminate the inherent settlement risk from the current foreign currency settlement processes and to provide a mechanism for containing any systemic risk arising from the failure of a major market participant.

Operations

CLS will have a fundamental impact on the way banks conduct their FX settlement business. It will have global implications for liquidity and cash management.

CLS introduces for the first time, 'payment-versus-payment' (PvP) into the foreign exchange settlement process. In order to manage this process a new entity has been created that is known as the "CLS Bank International" (CLSB).

CLSB will provide the necessary account structure and mechanism through which the separate payment legs of an eligible foreign exchange trade will be simultaneously exchanged (using a payment-versus-payment process), thus eliminating the associated settlement risk.

Standard Chartered at the forefront

Standard Chartered Bank has been deeply committed to this industry initiative since its inception in 1997 and holds full shareholder status in the new Bank. Standard Chartered will be operating as a Full Settlement Member within CLSB. The Bank will also be extending comprehensive Third Party services to our customers, enabling them to take full advantage of the settlement risk benefits associated with FX settlement through CLS.