CLS Group (CLS)*, the leading provider of risk mitigation and operational services for the global foreign exchange market, has started settling payment instructions in the Hungarian forint (HUF) on behalf of its settlement members, bringing to 18 the total number of currencies eligible for settlement through CLS.

The 18 CLS settlement currencies (where CLS Bank has a central bank account with the local central bank) are:

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The Magyar Nemzeti Bank (MNB), Hungary’s central bank, sought to enhance financial stability in the Hungarian market by making its currency, the HUF, eligible for CLS settlement. Hungary recognized that a partnership with CLS would reduce settlement risk among banks trading the HUF and would strengthen the overall stability of the Hungarian financial system. While adding a new currency to the platform is a major endeavour, involving extensive preparation and testing, the project was completed in less than two years as a result of close cooperation between the two parties.

Dr. György Matolcsy, Governor of MNB, comments: “We wholeheartedly welcome this successful collaboration with CLS. Approximately 90% of trading in the Hungarian forint takes place internationally, so it was important for us that it became eligible for CLS settlement. The CLS model provides a proven and trusted model for safe and efficient settlement of FX transactions and reducing settlement risk will reinforce the stability of our financial system and benefit the wider economy.”

FirstRand joins CLS 

Founded in 1998, FirstRand is one of the most important financial institutions in South Africa and the wider sub-Saharan region. It plays an important role in the trading of many currencies, including the South African rand, which has been a CLS-eligible currency for over ten years. The addition of FirstRand increases the total number of CLS settlement members to 64 and ties in with CLS’s strategy to expand levels of participation across all global regions.

Andries du Toit, FirstRand Group Treasurer, says: “Joining CLS as a settlement member is a great boost to our clients that are active in the global FX market. The South African rand is Africa’s most actively traded currency and mitigating settlement risk is a key priority for many institutions. Participation within the CLS ecosystem will enable us to achieve this goal and help reinforce FirstRand’s position as South Africa’s financial services group of choice.”

* CLS is a systemically important financial market utility, whose mission is to mitigate settlement risk in the global FX market. During 2015 CLS settled, on average, the equivalent of USD 4.8 trillion per day on behalf of its 64 settlement members and 18,000 indirect participants.

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CTMfile take: Although there are important operational improvements and savings for corporates in using CLS, the raison d’etre for using CLS is the elimination of FX settlement risk. Today, for many corporate treasury departments, it is the single largest unmanaged risk. The addition of Hungarian forints makes the CLS solution even more comprehensive.