Fed:8 U.S., Canada Banks Can Form Clearing House

The Federal Reserve Board has given eight banking companies permission to create a new clearing house for foreign exchange transactions.

The Fed, in a Dec. 4 order, said Chase Manhattan Corp., First Chicago NBD Corp., and six Canadian banks may invest in Multinet International Bank, a limited purpose trust company established to help them net their foreign exchange contracts.

The clearing house will limit its transactions at first to U.S. and Canadian dollars. But the Fed said Multinet may later seek permission to add other currencies.

Multinet agreed to impose several safeguards. These include monitoring the financial health of member banks and withholding payments from institutions that default on their contracts.