Cross-Border Clearing and Settlement
February 21, 2009 – 9:55 amThe only certainty in cross-border clearing and settlement is that delays will be involved. The underlying cause of these delays is that all currencies must eventually settle in their country of origin. U.S. dollar checks will settle through the U.S. payment system. If the check is drawn in U.S. dollars on the account of a bank that is not a member of the U.S. payment system, the item must be returned to the drawee bank for collection. This manual process, involving numerous mail and processing delays, can take weeks.
Although the United Nations and the European Community (EC) are currently attempting to establish limited international guidelines, cross-border movements of cash at present are not subject to any internationally accepted codes of performance, unlike trade transactions that are covered by International Chamber of Commerce (ICC) regulations.
 |
There are a number of examples where a foreign currency (usually the U.S. dollar) is widely used in a local economy and arrangements have been made to clear locally drawn and payable items offshore. The U.K. Currency Clearing system clears checks drawn and payable in the City of London in U.S. dollars, Canadian dollars, Australian dollars, Japanese yen, and Swiss francs. Singapore offers U.S. dollar check clearing. Hong Kong, the Philippines, and Canada all clear electronic payments and checks in U.S. dollars. Ultimately, however, the currencies will settle across correspondent accounts in their country of domicile. U.S. dollars will settle in the United States; British pounds will settle in the United Kingdom.
|
Taken From : Essentials of Managing Corporate Cash
