Bank OTP has become a member of the CLS Settlement, participating in a global system that settles foreign exchange transactions on a net basis, thereby decreasing counterparty risk in the foreign exchange market.
OTP Bank Plc., one of the largest commercial banks in Hungary and a key player in the Central and Eastern European region, has joined CLSSettlement, a global standard in foreign exchange (FX) settlement risk mitigation. This move is significant as it strengthens OTP Bank's ability to mitigate FX settlement risk and improve operational efficiency within the global FX market.
By becoming a direct CLSSettlement member, OTP Bank taps into a payment-versus-payment (PvP) system that ensures simultaneous settlement of both sides of FX trades, thereby reducing the risk of one party failing to deliver currency. This critical vulnerability, known as settlement risk, is a major concern for financial institutions operating in the FX market.
In addition to mitigating settlement risk, OTP Bank benefits from CLSSettlement’s multilateral netting mechanism. This mechanism aggregates and offsets trades across participants, potentially reducing the bank’s daily funding needs by up to approximately 96%. This substantial liquidity can then be used for lending, trading, or other business activities.
OTP Bank’s membership in CLSSettlement reflects a broader trend among financial institutions to strengthen risk controls, align with FX Global Code best practices, and improve liquidity management amid increased regulatory scrutiny and growing FX market complexity. As a regional player expanding in Central and Eastern Europe, OTP Bank’s move supports its strategic focus on resilient and efficient FX operations regionally and globally.
CLSSettlement, a financial market infrastructure group, delivers settlement, processing, and data solutions across the global FX ecosystem. Recognized as the global standard in FX settlement risk mitigation, it covers 18 of the most traded currencies. Lisa Danino-Lewis, Chief Growth Officer of CLS, has commented on OTP Bank’s decision to join CLSSettlement, highlighting the bank’s commitment to adopting best practices across its risk management and middle office functions.
The addition of OTP Bank Plc. brings the total number of settlement members to 75 in CLSSettlement. This expansion strengthens the global FX ecosystem by fostering greater stability and efficiency across international currency markets. The demand for safe and efficient settlement mechanisms continues to grow in FX markets, particularly among financial institutions seeking to align with the best practices outlined in the FX Global Code.
Attila Bánfi, Managing Director of OTP Global Markets, has also commented on the decision, expressing the bank's dedication to creating a more robust FX ecosystem. In H1 2025, CLSSettlement had an average daily settled value of USD7.9 trillion, up 12% year-on-year, demonstrating the growing importance of robust settlement mechanisms in the FX market.
This move by OTP Bank Plc. is indicative of a broader trend among financial institutions to focus on mitigating FX settlement risk and increasing efficiencies. By joining CLSSettlement, OTP Bank aligns with the best practices outlined in Principle 35 of the FX Global Code, further solidifying its commitment to risk management excellence.
[1] CLSSettlement Website: https://www.cls-group.com/ [2] FX Global Code: https://www.fxglobalcode.org/ [3] OTP Bank Plc. Website: https://www.otpbank.hu/ [4] OTP Group Website: https://www.otpgroup.hu/ [5] CLS Growth Announcement: https://www.cls-group.com/news/otp-bank-plc-joins-cls-settlement/
- As a CLSSettlement member, OTP Bank leverages financing to mitigate FX settlement risk and potentially reduce daily funding needs by up to approximately 96%, utilizing the benefits of a global standard in foreign exchange (FX) settlement risk mitigation.
- By adopting CLSSettlement's multilateral netting mechanism and payment-versus-payment (PvP) system, OTP Bank enhances its risk management practices and aligns with the recommendations in Principle 35 of the FX Global Code, further prioritizing risk management excellence across its operations.
