Chile’s central bank predicts the peso will be added to the CLS foreign exchange settlement system by 2021.

This is according to the central bank governor, Mario Marcel.

CLS is owned by several of the world’s largest commercial banks and has become a key component of FX market infrastructure since the system was launched back in 2002.

On average, $1.75 trillion was settled on its platform every day in August, accounting for around a third of the $5.1 trillion traded each day on the global foreign exchange market.

At present, the platform has 18 currencies, but the only one from Latin America is the Mexican peso. Chile hopes that being added to the CLS foreign exchange will strengthen the international standing of the country’s currency, as well as Santiago’s ambitions of becoming a regional finance centre, as reported by Reuters.

“We are prepared to dedicate all the time and resources to it,” Marcel told Reuters during an interview in London, highlighting 2021 as the forecast joining date.

The CLS forex system is viewed as an advantage as it permits real-time settlement of international trades, helping to eradicate ‘counter party risk’.

Furthermore, it reduces the necessity to hold on to so much liquidity as transactions are performed on a net basis.

The last country to join CLS was Hungary, with the process taking around two and a half years to complete.

In order to become a member of CLS, local banks have to agree, and the country’s central bank has to meet certain essential operational requirements, such as its own systems being live at the correct times.

This is something that may prove difficult for Chile as one of the main times for global foreign exchange settlement is in the middle of the night, meaning night shifts may have to be introduced for central bank employees.

The Chilean central bank governor went on to say: “It is a very carefully crafted process but we already had a large mission from CLS in June. The feeling was with Chilean banks, with the financial institutions, that the outcome was extremely positive.”

“It is already seven to eight months since we started, we are making good progress, but we know this is not something you rush.”

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