Today the BIS Committee on Payments and Market Infrastructures (CPMI) opened a consultation on increasing the adoption of payment versus payment (PvP) in foreign exchange (FX) transactions. In other words, ensuring that both currencies are exchanged simultaneously to reduce risk. In the DLT world, it’s referred to as atomic settlement.
In terms of total risk exposure, the FX market is the largest. Daily turnover was $6.6 trillion in 2019. A recent survey found that on any given day, $8.9 trillion may be at risk, with a potential loss of up to $2.8 trillion. In some jurisdictions, bank exposures to FX risks are bigger than their supervisory capital.
The UK is the country with the biggest exposure: FX risks are 150% compared to bank capital. Hong Kong and Singapore are also above 100%.
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