The risk of a major financial institution failing to settle its foreign exchange trades threatens the smooth operation of global markets, a Federal Reserve System governor said in a speech last week.

"Settlement risk involved in foreign exchange remains a weak link, and perhaps the single most problematic one in an increasingly integrated set of world financial markets," said David W. Mullins Jr., vice chairman of the Federal Reserve's Board of Governors, in a talk at a recent conference of the World Economic Forum at Harvard University.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.