ECB signals tougher stance on FX settlement risk

Trader penalties and client exposure limits suggested in new central bank guidance

European Central Bank, Frankfurt

The European Central Bank (ECB) has laid out new guidance around how banks should mitigate and reduce settlement risk in foreign exchange markets, including potential financial penalties on traders.

In a note published by the ECB yesterday (May 17), it says incentive schemes, business practices and infrastructure should be “properly aligned” for banks to minimise settlement failure. The guidance was based on an assessment of the FX settlement risk management practices of a sample of banks.


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