First Abu Dhabi Bank (FAB), the largest bank in the UAE has signed an agreement with the US-based financial service company CLS Group for testing and trialing the confirmation, matching and netting service ‘CLSNet’.
With the agreement, FAB took the title of region’s first financial service provider to be able to automate and standardize the netting calculation and reconciliation process with counterparties by using CLSNet and thus to increase the efficiency and reduce potential operational disparities.
Netting balances receivables against payments due, to reduce net payments and save transaction costs. It is one of the key tools used by companies that have a centralized treasury function.
The agreement will help FAB to reduce its exposure with counterparties through lowered settlement notionals and eventually improves credit line efficiencies. In the Foreign Exchange Global Code, netting is recommended to manage counterparty risk and reduce settlement risk.
“This agreement with CLS highlights FAB’s importance as a leader in the global FX market. Being the first mover in the Middle East showcases FAB’s commitment to embracing innovation, particularly as a specialist in emerging markets. We hope our vision to constantly grow stronger will spur other organizations in the region to similarly participate in this netting and confirmations system and improve standards across the board.”
Commenting on the agreement the Head of Product at CLS, Mr. Keith Tippell stated that, “the addition of FAB demonstrates the appeal of CLSNet to FX market participants trading in emerging market currencies. Given the sharp focus on settlement risk mitigation across the industry, CLS is investing further in evolving CLSNet to ensure broad-based adoption and, additionally, exploring new functionality related to liquidity optimization and payment certainty.”
First Abu Dhabi Bank
The largest bank in UAE, First Abu Dhabi Bank (FAB) was founded in 2017 as a result of the merger of First Gulf Bank and National Bank of Abu Dhabi. FAB offers financial solutions, products and services through its Corporate and Investment Banking and Personal Banking franchises.
The New York-based CLS Group is a specialist US financial institution the offers settlement services to its members in the Foreign Exchange Market. CLS was founded in 2002 with 39 members and seven currencies and by 2017 the company broadened its business with 18 currencies, 79 shareholders, 66 settlement members and over 24,000 third-party clients.
CLSNet is a bilateral payment netting solution that operates on a distributed ledger technology (DLT) platform, allows the users to drive operational process efficiencies like optimizing intraday liquidity, enabling real-time awareness of currency and counterparty exposures and reducing risk.