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The world is changing. FX settlement risk shouldn’t be an afterthought.
Even appreciating its focus on worst‑case scenarios, the World Economic Forum’s (WEF’s) Global Risk Report 2026 makes for sobering reading. The WEF finds that the world is entering a new phase of “geoeconomic confrontation,” as long‑standing post-Bretton Woods geopolitical and economic assumptions are challenged. The defining feature of the risk outlook for this year and beyond is uncertainty — around trade policy, economic protectionism and global conflict.
As these risks proliferate, the world is becoming more interconnected, the report says. For financial market participants, asset classes are increasingly entangled, with reactions to global uncertainties rippling almost instantly across markets.
Volatility is now the norm rather than the exception, and multi‑asset diversification is becoming as much about managing shocks as seeking returns.
This environment has, to some extent, accelerated a shift away from G10 economies, especially amid dollar weakness in 2025. Emerging market and developing economies (EMDE) equities have outperformed those of developed economies for the first time since the Covid-19 pandemic, reflecting investor demand for faster‑growing, less policy‑constrained markets.
In FX, turnover in EMDE currencies continues to rise, driven by structural shifts, deeper integration of these economies into the global financial system, and improved access as automation and transparency expand.
The Chinese renminbi is a bellwether of this transition. According to the 2025 BIS Triennial Central Bank Survey, it now appears on one side of 8.8% of global FX trades, up from 7% in the previous survey published in 2022.
CLS estimates that it settles 90% of the CLSSettlement-addressable market with PvP, and values continue to grow.
In parallel, liquidity provision is changing as non‑bank financial institutions (NBFIs) — such as investment funds and algorithmic market‑makers — as well as banks outside major economic centers are increasingly active in FX.
Indeed, NBFIs are now significant drivers of EMDE currency turnover. BIS research shows that NBFIs account for much of the recent growth of the FX market, while interdealer trading, once the backbone of the market, has declined. These NBFIs are more likely to settle bilaterally. Together, these trends point to a more distributed, diverse and complex liquidity landscape with greater potential for settlement risk.
Settlement risk
Amid this evolving risk landscape, payment-versus-payment (PvP) settlement remains the de facto market standard for mitigating FX settlement risk.
CLS estimates that it settles 90% of the CLSSettlement-addressable market with PvP, and values continue to grow. In 2025, CLSSettlement settled an average daily value of over USD8 trillion for 18 of the world’s most traded currencies, including a record USD22.9 trillion in FX payment instructions settled in a single day in December 2025.
But the trends outlined above mean that FX market participants should not be complacent. The volume of non‑CLS‑eligible currencies grew from USD0.2 trillion in average daily turnover in 2010 (around 5.5% of trades on a global scale) to USD0.7 trillion in 2022 (around 8.5%), according to the 2022 BIS Triennial Central Bank Survey. Settlement data from the 2025 survey is not yet available, but preliminary estimates indicate approximately 15% of the FX market still settles without risk mitigation.
As a public‑private partnership, CLS focuses on identifying these risks and working with its members and the wider ecosystem to expand services that meet changing market needs. CLS also contributes to initiatives such as the G20 Roadmap for Enhancing Cross‑Border Payments and the FX Global Code, both of which recognize PvP as a central tool for improving safety and efficiency in wholesale FX settlement.
In an environment defined by geopolitical tension, shifting capital flows and market structure change, organizations with exposure to FX markets – across both the public and private sectors – must remain focused on expanding settlement risk mitigation. These risks are not diminishing, and neither should our vigilance.
First published in Eurofi magazine, March 2026.
