TowerGroup Predicts CLS Volume to Increase by up to 90% in Eighteen Months

New research from TowerGroup predicts that CLS Bank will be settling up to 90% more instructions a day by the end of 2005. TowerGroup, independently conducted this research for a second consecutive year amongst 41 of CLS Banks Members and, for the first time, 36 customers of Members ("third parties")."The Continuous Linked Settlement (CLS) System: Building for Tomorrow Through Todays Innovations" study also predicted that the volume of third party instructions would increase by a factor of five by the end of 2006. Usage of CLS Bank by current users is also set to rise, with the proportion of current Member respondents settling over 50% of their daily value through CLS Bank rising from 60% now to 89% by the end of 2005. The research also highlights the increasing impact of CLS on the front office. Seventy-seven per cent of Member respondents reported changes to the credit approval process for CLS counterparties, with 59% reducing use of credit limits, and 15% eliminating settlement limits for CLS counterparties. Twenty-four per cent of Member respondents (compared with 19% in last years survey) report changed trading practices with counterparties, of which 80% indicate that they tend to favour CLS counterparties. Similarly, among third-party respondents, 54% report changed trading practices with counterparties, of which 68% indicate that they tend to favour CLS counterparties. Thirty-nine per cent of Member respondents also cited that they had improved access to counterparties in CLS. The research further found that among third-party participants, the average time taken to implement CLS within an organisation and to begin testing with CLS was six months. The reasons given for CLS participation included risk reduction (100%), additional credit lines (97%) and operational efficiency gains (91%). Third party respondents are also quickly realising a range of benefits from CLS. Benefits already realised included improved reconciliation speed (91%) and reduced error rates (77%). Member respondents also reported that CLS has reduced settlement risk (98%), reduced errors (80%), and improved straight through processing (76%). CLS Bank links eleven of the worlds central banks and many of the worlds leading financial institutions. Fifty-five Member banks are settling payment instructions associated with foreign exchange trades through CLS Bank, with 141 customers of Members also live. CLS Bank is now settling on average over 130,000 instructions each day, with a gross value in excess of US $ 1.3 trillion.