Bank of Korea Seminar New Paradigm in Foreign

Bank of Korea Seminar New Paradigm in Foreign Exchange Settlements: CLS Bank & Payment-versus. Payment Joseph De Feo - CEO, CLS Group 20 May 2002

FX market volume grows - risk rises Settlement time risk is real Long term rise in market volumes - peaking at US$ 3 trillion in recent years Bankhaus Herstatt failure 1974 Banks converging 2 Market volatility

How the world works today 2 days PLUS 3

CLS Settlement changes market practice Normal - 2 day contract Possible same day settlement Normal - 2 day risk CLS eliminates Settlement risk (temporal risk) Historical information Real-time information 1 day funding Timed payments intraday requirement Extends today’s domestic settlement finality globally 4

Who Australia - Australia & New Zealand Banking Group * Commonwealth Bank of Australia * National Australia Bank * Westpac Banking Corporation * Belgium- Fortis Bank * KBC Bank * Canada - Bank of Montreal * The Bank of Nova Scotia * CIBC Wood Gundy Plc * Royal Bank of Canada * The Toronto-Dominion Bank * Denmark - Danske Bank * Nordea Group * France - BNP Paribas * Caisse Nationale De Credit Agricole * Credit Lyonnais * Société Générale * Germany - Bayerische Landesbank * Commerzbank * Deutsche Bank * DG Bank * Dresdner Bank * Hypo Vereinsbank * Westdeutsche Landesbank * Italy - Intesa Bci * Unicredito * Japan - The Bank of Tokyo-Mitsubishi, Ltd * Mizuho Corporate Bank * C Norinchukin Bank * Sumitomo Mitsui Banking Corporation * The Sumitomo Trust & Banking Co. , Ltd. * UFJ Bank * Luxembourg – Dexia Banque Internationale a Luxembourg * Netherlands - ABN AMRO Bank * ING Bank * Rabobank Nederland * Norway - Den norske Bank *Singapore - Development Bank Of Singapore * Oversea-Chinese Banking Corporation United Overseas Bank * Spain - BBVA * Banco Popular Espanol * Banco Santander Central Hispano* Sweden - Skandinaviska Enskilda Banken * Svenska Handelsbanken * Switzerland - Credit Suisse First Boston * UBS * Zurcher Kantonalbank * United Kingdom - Barclays Bank * HSBC Holdings * Royal Bank of Scotland * Standard Chartered Bank * United States - Bank of America * The Bank of New York * Bank One * Bear Stearns Securities * BT Foreign Investment Corporation * Citibank * The Goldman Sachs Group * JPMorgan Chase * Lehman Brothers * Mellon Bank * Merrill Lynch * Morgan Stanley & Co. * Northern Trust Corporation * State Street Bank 5

How CLS Works Funding & Settlement Submitting Instructions 06: 30 6 07: 00 09: 00 Funding Completion 12: 00

CLS Bank Operational Timeline - CET On-going Submission of Instructions NORMAL PROCESSING SETTLEMENT AUTHORISATION SYDNEY TOKYO C. E. T LONDON NEW YORK 06: 00 05: 00 22: 00 21: 00 16: 00 08: 00 07: 00 00: 00 23: 00 18: 00 14: 30 13: 30 06: 30 05: 30 00: 30 15: 00 14: 00 07: 00 06: 00 01: 00 17: 00 16: 00 09: 00 08: 00 03: 00 COMPLETION OF PAY IN/PAY OUT PROCESS 18: 00 17: 00 10: 00 09: 00 04: 00 20: 00 08: 00 next day 19: 00 07: 00 next day 12: 00 00: 00 next day 11: 00 23: 00 06: 00 18: 00 Settlement European / North Completion American Target Time Funding Asia Pacific Completion Target Time Funding Completion Target Time 7

CLS Bank will be a Multicurrency Bank Holds a multi currency account for each Settlement Member CLS Bank holds RTGS settlement accounts with Central Banks Bank of England Bank of Japan 8 Reserve Bank of Australia US Federal Reserve Bank of Canada Swiss National Bank European Central Bank

Overlapping RTGS’s North America Europe Asia/Pacific 9

CLS Benefits 10 Settlement Risk Reduction Expansion of Foreign Exchange Trading -Greater Access to More Counterparties Liquidity Consolidation and Improved Credit Management Real Time Information on settlement and funds flows New Business Opportunities Nostro Services, Third Party Services, Ancillary Services Operational Improvements, Technology Advancement, & Reduction of Operational Risk Improved Funds Flow and Availability Intraday Liquidity Provider and Related Services Support for STP and T+1

Payment systems and CLS - the opportunity Convergence CLS complements global payment mechanisms today and in the future Reduces payments reduces costs Meets globalisation needs • Opportunity to differentiate services • Supports need for raising capital and investing cross border 11

CLS – achievements in the last year l 9 new Shareholders l 4 new CLS Bank eligible currencies l Core Systems ready l CLS Operations established l Shareholders are ready l Currencies are ready l Regulators approve l IT system complete and roll out in progress 12

2002 - Rolling out the CLS Bank service esting 13 T rialing T Co ntr oll ed Liv e Ph as e Co mm erci al Lau nch

CLS Bank following commercial launch 100 s of third party customers of member banks 90, 000 transactions per day with over 60 members in 7 currencies - 6 in line Competitive opportunity given industry developments and requirements 14 Ultimate value of CLS brand Potential for securities industry and T+1

CLS - The challenges ahead Increase Shareholder base Support Shareholders in building third party business 15 Extend currency reach Capture Shareholder volume Develop Custody proposition

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