International Clearing Systems

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Russian: Международные клиринговые системы

International clearing systems could be considered as an important for international commodities trade part of the financial market infrastructures (FMIs) that facilitate the clearing, settlement, and recording of monetary and other financial transactions can strengthen the markets they serve and play a critical role in fostering financial stability [1]. On the way to switch from bilateral to multilateral payment arrangements European countries created the European Payments Union in 1950 under the aegis of the Organization for European Economic Cooperation with the Bank for International Settlement or “the agent” acting as the settlement agent[2]. Driven by the success of the European Payments Union, developing countries had set up their own Clearing Unions: the Central American Clearing House in 1961, the Latin American free trade association payment system in 1965, which was subsequently converted into the Associação Latino-Americana de Integração, the Asian Clearing Union in 1974, the West African Clearing house in 1975, the Caribbean Common Market Multilateral Clearing facility in 1977, the Great lakes Economic Community’s Monetary Arrangement in 1978 and the Central African Clearing house in 1979, which was subsumed into Economic and Monetary Community of Central African States. However, only two of them, the Asian Clearing union and the West African Clearing House, have remained in operation with clearing operations at their core.

The FMI is defined as a multilateral system among participating institutions, including the operator of the system, used for the purposes of clearing, settling, or recording payments, securities, derivatives, or other financial transactions. FMIs provide participants with centralized clearing, settlement, and recording of financial transactions among themselves or between each of them and a central party to allow for greater efficiency and reduced costs and risks. Through the centralization of specific activities, FMIs also allow participants to manage their risks more efficiently and effectively, and, in some instances, eliminate certain risks. An FMI should use, or at a minimum accommodate, relevant internationally accepted communication procedures and standards in order to facilitate efficient payment, clearing, settlement, and recording [3].


References

  1. CPSS-IOSCO – Principles for financial market infrastructures – April 2012 - Bank for International Settlements and International Organization of Securities Commissions - http://www.bis.org/publ/cpss101a.pdf
  2. The European Payments Union and root causes of the economic crisis -http://www.eui.eu/Research/HistoricalArchivesOfEU/News/2013/12-18-TheEuropeanPaymentsUnionandrootcausesoftheeconomiccrisis.aspx
  3. CPSS-IOSCO, Op. cit., p.118
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