GFXD Issues Non-Settlement Interest Payment Guidance

The Global Foreign Exchange Division (GFXD), which represents many of the largest FX banks globally, has issued new guidance relating to the payment of interest for late settlement. The market has seen just such an event in last year, with the upheaval in the Russian rouble market following sanctions placing many local banks out of the mainstream market – indeed GFXD says that specifically with the rouble, aged interest compensation claims should be negotiated and settled as soon as possible, ideally within the next three-to-six months.

The guidance is presented in four sections. The first recommends that firms ensure that senior stakeholders, such as heads of trading, are involved in any discussions to resolve large or aged interest compensations claims as soon as possible. “Direct discussions with senior stakeholder peers at other organisations tends to help with the resolution of the claim,” GFXD observes.

It then recommends that firms negotiating claims refer to publicly-available resources, namely The FX Global Code, which has a section dedicated to settlement and confirmations, and ISDA’s Suggested Operating Practice on Interest Compensation Claims.

Thirdly, GFXD says where a cost of funds rate and default interest amount itself is not in dispute, firms should not hold up paying out simply because they are owed a default interest payment from another counterparty who has yet to pay them (even if this may end up with a reverse/opposite payment when the full population of interest compensation claims are agreed).

Finally, GFXD provides additional guidance on the rouble situation, saying that to help resolve this issue, market participants should avoid co-mingling rouble claims with claims in other currencies.