It’s finally time to move on from a $2.2 trillion problem by burying Bankhaus Herstatt — a half-century after its collapse.
On June 26, 1974, before the opening of the New York money market, liquidators swooped in and closed down the Cologne-based midsized lender before it could release the dollars for all the currency trades in which it had already received deutsche marks. The ensuing chaos on both sides of the Atlantic led to the creation of the Basel Committee on Banking Supervision. But the so-called Herstatt risk, in which one party is left holding a claim after it has discharged its obligations, has lived on.
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