A study from the U.S. Council on International Banking indicates that settlement risk is one of the primary concerns of international bankers.
About 81% of the banks participating in the study, "Banking Operations Decision-Maker," said they had taken steps to reduce settlement risk in the last year. By contrast, only 16% of the participants in the study had worked to lower derivatives risk.
The relative attention paid these two types of risk is somewhat surprising, given the high-profile derivatives risk in the financial crises at Barings PLC and in Orange County, Calif.
However, experts said settlement risk deserves the attention it's getting. Failure to settle international transactions can have a "devastating impact" not only on banks but also the "entire economic system," said Dan Taylor, president of the New York-based U.S. Council.
The study is part of the council's effort to step up its role in providing statistical information on international banking operations.
"This is the start of a number of surveys we'll be doing," said Mr. Taylor. "One of the things we find is that there's not enough information that people need on trends, volumes, and benchmarking numbers that they can compare one against another."
Questionnaires were sent last July to the group's 353 member banks. They account for over 95% of all outstanding letters of credit, 95% of Fed Wire and Chips wire transfers, and 95% of interbank messaging traffic on the Swift network.
About half of the study's 70 respondents were U.S.-based. Their responses underscored concerns with the growing dollar values, velocity, and global nature of money movement.
The study found that international bankers placed much emphasis on new technologies.
Nearly 90% of respondents said they plan to invest in new technology over the next year. The most popular technology investments include local and wide area networks (50%); client/server systems (38%); imaging technologies (24%); and electronic data interchange systems (21%).
Of the banks expanding their technology investing, 57% said they will invest at least $100,000.
Mr. Taylor said the technology investments are a function of the banks' effort to reduce paper - such as the import documents that accompany letters of credit and trade services - with imaging and electronic data interchange systems.
Less than half of respondents expressed concern about non-bank competition."I'd have thought that would have been higher," said Vincent Maulella, chairman of the U.S. Council and a vice president with Chemical Banking Corp.
Another section of the study disclosed that 57% of the respondents outsourced parts of their operations, while 45% said they had considered farming out even more.
"I agree with people that say in the next five to ten years, there will be two kinds of financial institutions: those that own the clients and customers, and those that own the products and delivery systems," Mr. Maulella said.
Future studies will track statistical information such as trade services volumes and the number of letters of credit that banks issue, as well as more generalized issues such as trends in new operations and technology.