Banks seek to standardise cross-currency settlement dates

Talks under way to exchange principal amounts on IMM dates to allow for greater netting

Pinpointing risk: there is talk of settling cross-currency swaps on a net basis and using IMM dates

A group of banks is working on a way to reduce risks from the large principal exchanges required by cross-currency swaps. The move comes as it emerges the instruments are more likely to be traded bilaterally than via clearing houses under the new derivatives margin rules.

Cross-currency swaps require banks to exchange principal amounts at the start of the trade and at expiry. This can create a large amount of settlement risk for the respective banks in the trades, which can be more than 10 years