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Cross-border claims from banks in the UK to counterparts in others are equivalent to more than 90 per cent of GDP, according to Moody’s Investors Services, underlining the City’s place at the heart of the international financial system.
However, the implementation of blockchain technologies for clearing and settlement of transactions could cut out the need for middlemen in trillions of pounds worth of transactions, disrupting a large part of the City’s financial services.
Colin Ellis, a Moody’s managing director, said the UK “stand[s] out as having a lot of cross-border claims” relative to other nations, with only the much smaller economies of Luxembourg and Hong Kong more exposed.
Cross-border transactions currently take a tortuous path through each party’s bank, and correspondent banks with foreign links, and in a process which can take days and add significant costs for the end clients.
Blockchain technologies promise to remove the middlemen, with an immutable, distributed ledger rather than one reliant on a trusted (and possibly expensive) counterparty.
While the eradication of costs from transactions could be a boon to end users, it represents a challenge to the portions of the industry which provide those services.
Full report on Moody’s website (subscription required)