Our File: P2815-7

September 7, 2000

TO: Banks; Federally Regulated Trust and Loan Companies

Today, the Basel Committee on Banking Supervision released a paper entitled Supervisory Guidance for Managing Settlement Risk in Foreign Exchange Transactions. The paper was originally published for consultation in July 1999. Comments received on the consultative paper provided the Basel Committee with helpful suggestions for improvements to the final version of the paper.

The guidance was drawn up in close consultation with the Committee on Payment and Settlement Systems (CPSS). The purpose is to provide banking supervisors with information about foreign exchange settlement risk and its management that they should take into account when assessing a bank’s policies and procedures. All banks should have a good understanding of foreign exchange settlement risk and have formulated clear firm plans for how to manage it.

OSFI has taken an active role in the Basel Committee and endorses the principles put forward in this paper. The paper is available in English on our web site at http://www.osfi-bsif.gc.ca and on the BIS web site at www.bis.org Questions on the paper should be directed to Aina Liepins, Capital Division at (613) 998-5606.

Sincerely,

Robert Hanna
Senior Director, Capital Division