For almost all of the banks which were researched in the G-10 countries group, the minimum exposure that the banks face in their individual transactions (regardless if these are spot or forward transactions), time duration of Status I lasts from one to two working days. This time duration of Status I relate when all the currencies are traded with, except Japanese Yens. Time duration of Status I in trading with Japanese Yens lasts up to three working days, counting from the day when the FEYCS members can sent irrevocable instructions for paying with Yens in the Japanese payment system .
As supplement to this, time duration of financial transactions settlement is continued for additional one to two working days (time duration of Status U). As a result of the previously said, it would take more than three working days (if holidays and weekend occur between these three working days, the days would be much more) from the beginning of risk emergence that the banks are facing in its operation, containing in it the time necessary for complete transaction processing.
Seeing from the view point of the banks, with the settlement of purchased currencies before the settlement of currencies that were sold, they may face risk of not being able to cancel the currency they sell. In such cases, they are forced to pay out the currency they sold, even in cases when it is clear that they will not get the currency they agreed to. This case occurs mainly when transactions are concluded in zones of huge time difference. It is best to use settlement system, which could make settlement of two currencies simultaneously . Continue reading “Time duration of transactions settlement- magazine Economy and Business”