CLS Bank has agreed in principle to include the South African Rand as a CLS Bank eligible currency once all the requirements in CLS Bank’s rules have been satisfied and the necessary regulatory approvals have been obtained.
As with all prospective eligible currencies, the South African Rand will become eligible once the full CLS Bank and regulatory approval processes have been satisfied and the technical implementation is completed. The objective is for the currency to become eligible by the end of 2004, along with the Hong Kong Dollar, New Zealand Dollar and Korean Won that were previously endorsed in principle by the CLS Bank Board.
Once these currencies become eligible, they will join the Australian Dollar, Canadian Dollar, Euro, Japanese Yen, Pound Sterling, Swiss Franc, United States Dollar, Danish Krone, Norwegian Krone, Swedish Krona and Singapore Dollar as CLS Bank eligible currencies.
A total of 56 Member banks are now settling payment instructions associated with foreign exchange trades through CLS Bank, with over 120 customers of Members also live. CLS Bank is now settling on average over 130,000 instructions each day, with a gross value in excess of US $ 1.4 trillion.
“The addition of the South African Rand represents another step forward for CLS Bank, continuing the expansion of the service into new markets,” says Joseph De Feo, President and CEO of CLS Bank. “This is an exciting development that further demonstrates the strength of support for CLS Bank amongst the global banking community. CLS Bank Members and their customers are already benefiting from a range of risk, liquidity and efficiency benefits in eleven currencies. By the end of this year, subject to regulatory and internal approval, we aim to expand these benefits in fifteen currencies.”
Dave C Mitchell, Head of the National Payment System Department, South African Reserve Bank, says the South African Reserve Bank has received formal commitment from two South African banks, regarding their intention to become shareholders of the CLS Group. “The Reserve Bank in its endeavour to reduce settlement risk of all market participants in the South African Rand supports the domestic banking industry’s direct participation in CLS and thereby also the inclusion of the Rand in CLS as a settlement currency,” he says.
Mitchel adds that the Governor of the Reserve Bank, Tito Mboweni, has assured CLS Bank that the Reserve Bank is well aware that a considerable amount of work needs to be done before the Rand can be settled via CLS Bank, but that the Reserve Bank is fully prepared to take all the necessary actions to provide for the best possible legal, technical and sound institutional environment to facilitate the successful implementation of the Rand in CLS.