Rand to enter the big league (16/09/2004)

Cape Town - Legislation intended, among other things, to position the South African rand among the top 15 settlement currencies in the world was adopted in the national assembly on Thursday.

Introducing debate on the National Payment System Amendment Bill, Finance Minister Trevor Manuel said the strength of South Africa's financial system had undoubtedly been a key component of the positive real economic growth of the past few years.

However, maintaining this financial stability was an ongoing task.

The bill allowed for the inclusion of the rand in multi-currency Continuous Linked Settlement (CLS) operated by CLS Bank, he said.

CLS Bank is registered in the United States, and operates as a multi-currency bank, holding an account for each Settlement Member and an account at each eligible currency's Central Bank, through which funds are received and paid.

It will hold a settlement account in the South African Multiple Option Settlement (SAMOS) system of the SA Reserve Bank.

Benefits

Continuous linked settlement is a unique process that enables cross border currency transactions to be settled intra-day.

As it is a real-time, global settlement system it will significantly reduce the settlement risk caused by delays arising from differences in time zones, legal jurisdictions and operating procedures.

CLS Bank is now settling on average over 130 000 instructions each day, with a gross value in excess of US$1.4 trillion.

Top 15 currencies

Manuel said the proposed inclusion in CLS would position the rand globally as one of the top 15 currencies.

The South African rand will join the Australian dollar, Canadian dollar, the euro, Japanese yen, British pound, Swiss franc, United States dollar, Danish krone, Norwegian krone, Swedish krona and Singapore dollar as CLS Bank eligible currencies.

The banking system would receive the risk-management, liquidity, and efficiency benefits of the CLS system.

"The inclusion, furthermore, demonstrates that the South African payment system provides for global best practice, and would foster domestic and international investor confidence in the integrity and robustness of the national payment system," Manuel said.

Joseph De Feo, President and CEO of CLS Bank, said: ?The addition of the South African rand represents another step forward for CLS Bank, continuing the expansion of the service into new markets.

This is an exciting development that further demonstrates the strength of support for CLS Bank amongst the global banking community.

CLS Bank Members and their customers are already benefiting from a range of risk, liquidity and efficiency benefits in eleven currencies."