CLS welcomes the publication of the Bank for International Settlements’ (BIS) latest assessment of foreign exchange (FX) settlement risk, which highlights both the significant progress made by the industry and the work that remains to further mitigate settlement risk in the global FX market. 

The report reinforces the importance of payment-versus-payment (PvP) settlement as the most effective means of eliminating settlement risk. It is encouraging to see continued momentum in the adoption of PvP mechanisms, alongside increased industry focus on measuring and managing FX settlement risk. 

The BIS reports that 90% of average daily FX settlement in April 2025 was settled via methods that eliminate or reduce FX settlement risk. However, approximately 10% of FX transactions by value continue to settle on a gross bilateral basis, underscoring the need for continued industry collaboration to reduce settlement risk and further strengthen the resilience of the FX ecosystem.

The report also marks an important step forward in the industry’s understanding and measurement of FX settlement risk. The updated methodology, developed through collaboration between the BIS, the Bank of England and market participants, improves transparency and consistency across the market.

At the same time, the findings point to an evolving FX market structure where settlement risk is becoming more distributed across a broader range of currencies and counterparties; in particular, in currencies not supported by CLS which are seeing increased activity. While PvP remains the de facto standard for settlement risk mitigation, the report highlights the growing importance of complementary risk mitigation tools where PvP is not available, such as netting. This aligns with the risk waterfall approach outlined in Principle 35 of the FX Global Code.¹

The cross-border payments interoperability and extension (PIE) task force, to which CLS contributed alongside other public and private sector participants, is also exploring further avenues of risk mitigation. A report² from the task force highlights that reducing FX settlement risk requires a combination of tools, including PvP and liquidity optimization, as well as sustained public-private sector collaboration, particularly in currencies and markets where PvP settlement is not yet available.
 
CLS continues to support these efforts through its PvP settlement service, CLSSettlement, and bilateral payment netting calculation service, CLSNet. CLS will continue to work with both the public and private sector to expand risk mitigation across a wider range of FX flows and support the continued resilience of the global FX market.