Mitsui / CLSSettlement
Deputy GM, Planning & Administration, Finance
Mitsui & Co., Ltd.
Mitsui & Co. became the first Japanese corporate to access CLSSettlement as a third-party participant in March 2018, through Sumitomo Mitsui Banking Corporation (SMBC), a CLS settlement member.
Mitsui & Co. (Mitsui) is a Japanese general trading company with a diverse business portfolio and 132 offices across 64 countries and territories as of 1 April 2021. Its portfolio includes steel products, mineral & metal resources, machinery & transportation systems, chemicals, energy, foodstuffs, distribution, healthcare & services, consumer business, information & communication technology, and corporate development. The company also engages in logistics, finance, and the construction and operation of international projects.
As part of its efforts to streamline its foreign currency operations and mitigate FX settlement risk, Mitsui had to rely on experienced staff before it used CLSSettlement to settle its FX transactions.
Market challenges
Mitsui’s Finance division is responsible for securing liquidity through capital raises, clearing and settlement of funds and securities, and execution of various financial transactions, such as FX forwards and swaps and options for interest rates and currencies. The company’s FX transactions involve sales, paid-in capital reductions, dividend payments and trades of several hundred million USD in merger and acquisition deals. At Mitsui’s head office in Japan alone, the annual turnover of FX forwards is approximately JPY2 trillion to JPY3 trillion (USD18 billion to USD27 billion).
“The percentage of FX transactions settled in CLSSettlement has grown steadily, enabling Mitsui to streamline its business processes while also mitigating FX settlement risk for its payments.”
Such diverse and complex business operations require Mitsui’s processes to be agile, efficient, timely and stable. Further, to ensure access to sufficient liquidity across the FX market, particularly during periods of extreme volatility, it actively trades with over 20 counterparty banks and broker-dealers where Mitsui holds multiple accounts across multiple currencies. To consolidate the proceeds in each currency into its central payment bank, SMBC, Mitsui previously used a variety of methods, including internet banking services, telephone, fax or email communication, to transfer funds between banks. To simplify and streamline complex arrangements, Mitsui tried Robotic Process Automation and Single-Sign-On tools to maximize automation, but these only provided limited improvements in overall process efficiency.
As Mitsui’s business presence expanded into emerging economies and new industries, the company was required to allocate more resources to these areas. It also became apparent that trading stocks and FX options and swaps in emerging market currencies was far from standardized and required significant manual intervention by skilled employees.
Mitsui was also under pressure in Japan to address social demands and reform its operations, including improving employees’ work-life balance and reducing their total number of working hours. This changing business environment made Mitsui realize that they had to look at enhancing their processes and do things differently.
During the review process, the company also closely examined its FX payment flows. Through its existing counterparty banks and broker-dealers — who are CLS settlement members — Mitsui was already familiar with CLS and its critical role in ensuring FX market stability during the 2008 global financial crisis. As a result Mitsui recognized that by using CLSSettlement, CLS’s global payment-versus-payment (PvP) FX settlement system, it could address a number of its growing business pain points.