MUFG Bank becomes first Japanese lender to join CLSNet

abdelaziz Fathi

FX settlement specialist CLS Group has onboarded Japan’s biggest lender, Mitsubishi UFJ Financial Group (MUFG), to CLSNet, the foreign exchange bilateral payment netting system for emerging currencies. MUFG is the world’s fourth-largest bank by assets and the largest non-Chinese lender.

MUFG

CLSNet service covers approximately 120 currencies and MUFG is joining its growing community of global and regional financial services institutions, which includes eight of the top ten global banks. The centralized platform was originally built with IBM using the Hyperledger Fabric enterprise blockchain.

Using CLSNet helps FX market participants adhere to the FX Global Code – the industry’s global principles of good practice for the FX market. Instead of settling every transaction individually, automated netting reduces the required margins, leaving more funds available for other purposes. As such, the solution helps increase liquidity, reduce counterparty risk and costs of manually calculating netting or settling a higher volume of transactions. Plus, the cost of settling emerging market currencies tends to be relatively high.

MUFG Bank is the first Japanese bank to commit to using CLSNet, which has seen a substantial rise in adoption this year, with a 495% year-on-year increase in the average daily notional of net calculations in Q3 2022. In August 2022, the group reported a record $100 billion in the average daily notional of net calculations in CLSNet. The milestone marks an increased adoption from market participants and follows the 179% year-on-year increase in the average daily notional of net calculations in H1 2022.

CLSNet standardizes and automates post-trade matching and netting processes across the global currency spectrum. As market participants continue to focus on the risks associated with post-trade processing and settlement in currencies outside of CLSSettlement, CLSNet offers standardization and automation through a single platform which mitigates risk, reduces operational costs and optimizes liquidity for these currency flows.

Lisa Danino-Lewis, Chief Growth Officer, CLS, commented, “We are delighted to welcome MUFG Bank as the first Japanese participant in CLSNet. As the global network continues to grow, participants will benefit from the expanding range of netting counterparties, as well as the improvements to liquidity optimization, operational efficiencies and risk mitigation benefits of the service.”

Junya Kishida, Head of Global Markets Operations Division, MUFG Bank, said: “CLSNet provides unparalleled standardization and centralization of post-trade processes across the global currency spectrum. Our participation in the service will be integral to our ability to improve operational efficiency and reduce risk for the currencies that are not currently eligible for CLSSettlement. CLSNet also supports MUFG Bank’s adherence to the best practice settlement risk principles of the FX Global Code.”

Akira Kato, Head of Client Engagement, Asia Pacific, CLS, added: “The addition of MUFG Bank to CLSNet reinforces the value the service is delivering to the broader FX market. With the growth of FX trading, particularly in Asian currencies, it is essential that market participants adopt effective solutions to manage risk for their post-trade processes.”

 

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