• Foreign Exchange
• International and Correspondent Banking
• Payment Systems and Money Transfers
• Risk Managers
• Auditing and Compliance
• Payment Strategy
• Retail Banking Services
• Banking Product Development
• Money Transfer Operators
• Foreign Exchange Dealers
• Risk Professionals
• Internal Audit

This course is for beginners and seasoned foreign exchange practitioners alike.

It is just over a decade since central banks launched a major campaign to reduce foreign exchange settlement risk. That strategy was based on the belief that the private sector, in active cooperation with the public sector, had the power to control the foreign exchange settlement risk that first came into sharp focus at the time of the failure of Bankhaus Herstatt in 1974.

While much progress has been made over the past ten years, much still remains to be done.

In a recent progress report form the BIS, its Steering Group on Settlement Risk in Foreign Exchange Transactions, concludes that while encouraging progress has been made, specifically with the creation of the Continuous Linked Settlement (CLS) process, more needs to be done. While many individual banks and groups of financial institutions have greatly improved the way they manage their foreign exchange settlement exposures, many banks still do not manage their exposures appropriately and industry efforts have not yet realized their full risk-reducing potential. This 2-day intensive course takes you directly into the world of Foreign Exchange Risk. Participants will gain a deeper insight into Foreign Exchange Settlement Risk, what it is and what is needed to control it.

Different types of settlement mechanisms are examined in detail, including how banks, worldwide, handle these processes today. Because of its significance the CLS rational, processes and practicalities are examined in detail.

Join us to explore the nature of foreign exchange settlement risk, what has been done and what remains to be done to mitigate it. This is a practical “hands on” course that will provide participants with the wherewithal to better mitigate Foreign Exchange Settlement Risk. This intensive interactive 2-day course introduces you to the area of the greatest potential risk in the international financial system.

This course is designed to assist financial institutions, foreign exchange operators and payment service providers who want to improve their understanding of these critical issues.    

Citadel Advantage offers an intensive 2-day course taught by experienced practitioners with extensive international and domestic payments experience. The course provides a comprehensive insight into all the aspects of foreign exchange settlement and its attendant risks. It is designed to assist financial institutions that want to improve their understanding of this important issue as well as develop the appropriate risk mitigation strategies.

We examine how the public and private sectors can collaborate to reduce this critical risk and potential threat to the international financial system. The course curriculum provides for training in a neutral and unbiased manner covering a variety of topics which will provide participants with a clear understanding of  all the foreign exchange settlement issues.

• Define FX Settlement Risk in terms of the current World payments scene.
• Gain a deeper insight into the major cause of foreign exchange settlement risk, and the size and potential damaging impact of a settlement failure.
• Discuss the many challenges facing the foreign exchange practitioners.
• Gain a better understanding of how national and international payment system risk mitigation policy interacts with the requirements financial institutions, central banks and banking regulators.
• Gain a greater understanding of the magnitude of the flows involved. What are the real and hidden dangers?
• Appraise how FX Settlement is "governed" in terms of international standards and guidelines.
• Explore the many innovations and business opportunities presented to banks and other financial institutions by the change in settlement processes.
  

An introduction into Foreign Exchange

• Currency principles
• Definitions

What is Foreign Exchange and how does it work?

• What are the Risks?
• We examine a number of landmark bank failures which had brought foreign exchange settlement risk to the forefront. Case studies included are;
  • Herstatt Bank
  • Drexel Burnham Lambert
  • BCCI
  • Baring Brothers
  • The attempted Soviet coup d'état in 1991

Managing the Risks - The 1996 Strategy

• The three “track” strategy which includes;
  • Individual Banks,
  • Industry Groups. and
  • Central banks.

Development since 1996

• How the industry has implemented this strategy

The 2006 Survey

• The Mathematics of Foreign Exchange Settlement
• Who uses which settlement methods

The Present Situation

• How are key exposures defined & measured
• How this relates to the foreign exchange settlement process
• The effect of payment system opening hours and time zones
• Present day exposure profiles  

As a case study we present a detailed analysis of a hypothetical foreign exchange portfolio

Settlement Methods 

• Traditional Correspondent Banking
• Bilateral Netting
• Continuous Linked Settlement
• On-Us methods, and
• Other Payment Versus Payment (PVP) systems

Continuous Linked Settlement ( CLS )

Because the CLS process is the most complex and the most notable of all the strategic tracks we examine CLS in detail.

• What CLS is and how it operates
• CLS ’ overall effect on the foreign exchange settlement risk position today

Present Day Actions

• Publicity, education and communication
• CLS and other industry groups
• Supervisory measures
• Improvements to payment services

The Future

The strategy has produced some notable successes. However it has also shown itself to be vulnerable. We explore these vulnerabilities and examine the work that lies ahead.