From this week, the shekel is a convertible currency on capital and money markets worldwide, after Israel was made an official member of the international currency clearing system operated by CLS Bank International. From now on, the Israeli currency is legal tender internationally, meaning that it can be used in trading on markets overseas, with banks everywhere converting shekels into other currencies, and Israeli companies and firms now able to settle payments in shekels either by check or bank transfer to the accounts of their customers overseas.
The Mexican peso has also received recognition from CLS.
The announcement by CLS said, "Following regulatory approval, the Mexican peso and Israeli shekel have been designated as CLS Bank Settlement Eligible Currencies by the CLS Bank Board of Directors. The extension of the CLS Bank service to these currencies enhances systemic stability in the settlement of foreign exchange transactions, and over half of all CLS Bank Members will be able to settle in these two currencies immediately."
Admission to the CLS system will mean that Israeli firms and businesspeople will be able to carry out all their payments and clearance locally, and these will be honored by their overseas customers. Check clearance and bank transfers will be executed through the two largest banks, Bank Leumi (TASE: LUMI) and Bank Hapoalim (LSE: 80OA; TASE: POLI), backed by the new clearing platform set up at the Bank of Israel last September.
Several countries and companies already honor the shekel, but the announcement by CLS is a symbolic act that gives an international stamp of approval to the Israeli currency, and recognizes it as one of the strongest currencies in the world.
Governor of the Bank of Israel Stanley Fischer commented, “The inclusion of the Israeli shekel as a settlement currency in CLS is a significant further step in Israel’s increasing integration into the global economy. By reducing settlement risk in FX transactions, vital to Israel’s open economy, it reinforces the stability and efficiency of Israel’s banks and financial system, and benefits the entire economy.
"We are pleased that the ongoing reform of the payments system undertaken by the Bank of Israel, including the introduction of an RTGS system and adoption of a modern payments system law, along with the bank’s close cooperation with CLS Bank, the new Israeli members of the CLS service and others has made this possible.”
Published by Globes [online], Israel business news - www.globes-online.com - on May 26, 2008
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