Bank of America has gone live on CLS's cross-currency swaps service, adding another major bank to a platform designed to settle principal exchanges in those trades.
The service addresses a longstanding issue in the foreign exchange market: cross-currency swaps require large initial and final principal exchanges between counterparties. Those flows can leave banks exposed to settlement risk if one side pays out and the other fails to deliver.
CLS's service settles payment instructions for principal exchanges through a payment-versus-payment mechanism, ensuring both sides of the swap settle simultaneously. The model is intended to remove counterparty failure risk on those payments while reducing the operational friction associated with gross bilateral settlement.
Bank of America joins other global banks already using the service as foreign exchange trading volumes continue to rise. According to the Bank for International Settlements' latest triennial survey, daily FX turnover reached about USD $9.6 trillion in April 2025, up 28% from the previous survey in 2022.
That increase has kept attention on how banks manage settlement risk, particularly in products such as cross-currency swaps, where the principal exchanged can be substantial. Policymakers and regulators have also encouraged the wider use of payment-versus-payment arrangements to limit settlement risk.
Use of CLS's cross-currency swaps service has been expanding. The average daily settled value of cross-currency swaps submitted to CLSSettlement rose by 87% in 2025, according to the company.
That growth comes as financial institutions face greater scrutiny over intraday liquidity and settlement practices. The FX Global Code, which sets standards for market conduct, says participants should eliminate settlement risk where practicable, including through payment-versus-payment settlement services.
Market pressure
Banks and large companies commonly use cross-currency swaps to manage funding and currency exposures across jurisdictions. Because the trades involve exchanging principal in two currencies at the start and end of a contract, they can create larger settlement exposures than many other FX products.
When these transactions settle on a gross bilateral basis, banks may face greater liquidity demands because each institution must fund payments separately. CLS says its service allows participants to integrate those flows into CLSSettlement and benefit from multilateral netting, which can reduce daily funding needs.
The service can also be used with OSTTRA MarkitWire's post-trade processing platform, helping channel cross-currency swap flows into the CLS system. The link reflects a broader market push to connect post-trade processing with settlement infrastructure to reduce manual intervention and operational bottlenecks.
For Bank of America, the decision points to the importance of reducing unsecured settlement exposure as volatility and funding pressures remain elevated across global markets. Large FX dealers have been looking for ways to improve resilience in core market infrastructure while keeping pace with higher trading activity.
Lisa Danino-Lewis, Chief Growth Officer at CLS, linked the bank's move to those broader market trends.
"With FX trading volumes at record levels and the average daily settled value continuing to grow, mitigating settlement risk has never been more important. The continued expansion of our CCS service, alongside Bank of America's go-live, demonstrates meaningful progress in reducing risk across the FX market," Danino-Lewis said.
Carlos Fernandez-Aller, Co-head of Global FICC macro at Bank of America, said the bank viewed the change as both a risk and liquidity measure.
"In an environment of heightened market volatility and increasing intraday liquidity demands, reducing unsecured settlement risk is a priority. This milestone demonstrates our commitment to reducing counterparty risk on cross currency swap initial and final principal exchanges while delivering operational and liquidity efficiencies that will support the continued growth of our FX business," Fernandez-Aller said.
Bank of America is one of the largest participants in global financial markets, with operations in more than 35 countries. Its adoption of the service adds weight to CLS's effort to broaden the use of payment-versus-payment settlement beyond traditional spot and forward foreign exchange transactions into more complex swap structures.
The development also underlines how post-trade infrastructure providers are seeking a larger role in parts of the market where settlement risk remains harder to contain. For banks active in cross-border funding and derivatives, the practical challenge remains the same: how to process rising volumes while limiting the liquidity strain and counterparty exposure that can build up around major principal exchanges.