Dollar settlements in Asia made easy as Fedwire extends hours

Indian exporters and importers can now settle dollar payments to counterparts in other Asian countries on a real-time basis with a saving of about 40 per cent in remittance cost.

The real-time dollar settlement in entire Asia has been made possible by a recent US Federal Reserve's decision to extend operating hours of the Fedwire, the real-time gross settlement system, and the Clearing House Interbank Payment System (CHIPS).

Dollar has predominantly been used as hard currency for trade settlement and a form of reserve for Asian central banks. However, till recently, processing times were restricted to American and European time zones, making it difficult for financial institutions in Asia to execute and settle payments and receipts quickly and in a cost-effective way.

"With increased processing hours, customers in Asia can optimise their liquidity management," said John Ball, Deutsche Bank's head of cash management - financial institutions for Asia-Pacific.

The change in processing hours is also timely because there has been strong growth in intra-Asia trade leading to an increase in dollar settlement volumes between countries in Asia.

Distribution of payments and receipts can now be done during the start of a business day in the continent, which could bring down operational and settlement risks and reduce backlogs and bottlenecks.

The increased processing hours now allow automated reconciliation and straight-through processing.

Ball said the real-time settlement is particularly useful for institutions having remittance business within Asia and for those who need to address the settlement of trade transactions in cases where exporters and/ or importers are based in Asia.

Deutsche Bank launched its intra-Asia solutions for commercial money transfers in dollar following the extension of operating hours of CHIPS.

The solution sends payment instructions directly to the beneficiary's bank, allowing client banks to have better turnaround time in servicing their customers.

Deutsche Bank also offers its customers a choice to go for its product where it guarantees full principal payment to beneficiaries at a fixed price.

The pricing is opposed to the normal multiple bank charges deducted from the amount payable to the beneficiary.

Deutsche Bank is able to leverage CHIPS expanded processing hours to the advantage of its clients who use its intra-Asia commercial money transfer services.