Magazine article American Banker

Multinet Clearing House Seeking a Bank Charter

Magazine article American Banker

Multinet Clearing House Seeking a Bank Charter

Article excerpt

The eight major North American banks that own Multinet International, the securities clearing house, have moved to obtain a bank charter that officials say will result in reduced risk and cost savings.

Multinet, through its owners, which include Chase Manhattan Corp., First Chicago Corp., and Bank of Montreal, has applied to the Federal Reserve and to the New York State Banking Committee for a charter to gain the benefits of being a regulated financial institution, officials said.

Protection Against Losses

As a bank, the clearing house will enjoy greater protection against losses should a participating bank go bankrupt. U.S. regulators allow banks' obligations to one another to be offset when one goes bankrupt, a benefit not necessarily extended to corporations.

Multinet International Bank -- the proposed name -- will operate as a foreign exchange transactions clearing house. The bank will be run by International Clearing Systems Inc., a subsidiary of Options Clearing Corp.

The founding banks have applied to become shareholders. Multinet also is seeking membership to the Federal Reserve System and access to Fedwire and the treasury book system. The application is currently under review.

Chase Will Be a Client

Eshagh Shaoul, vice president and credit executive for global risk management with Chase, expected the money-center bank to immediately start using the clearing house for its 2,500 daily trades once Multinet obtains its charter. …

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