Sources inform "Globes" that Bank Leumi recently signed an agreement with US bank JP Morgan Chase and Co. to provide simultaneous clearance services for deals taking place solely in foreign currency.
The arrangement marks the first time an Israeli bank will benefit from simultaneous clearance services of this type. The Bank of Israel also recently signed a similar agreement with HSBC.
Simultaneous clearance services are designed to eliminate the bank's risk in foreign currency swap deals involving various foreign currencies, in contrast to exchanges involving foreign currency and shekels. Israeli banks are exposed for several hours iin such deals, since they transfer one currency to a bank in the country whose currency is involved, while several hours pass before they receive the other currency from another bank in another country.
The CLS bank in London, owned by the world's 15 largest banks, including Citibank, JP Morgan Chase and Co., HSBC, UBS, and Credit Suisse First Boston, was set up in order to avoid this risk. Simultaneous clearance services enable a bank to receive the purchased currency immediately upon payment of the sold currency.
The other large and medium-sized banks in Israel are also scheduled to reach simultaneous clearance agreements with one of the CLS member banks.
Published by Israel's Business Arena on February 4, 2002