Herstatt Bank

Herstatt Bank (Bankhaus I.D. Herstatt K.G.a.A.) was a privately owned bank in the German city of Cologne. It went bankrupt on 26 June 1974, an event widely referred to as the Herstatt crisis. Herstatt's failure specifically highlighted the importance of settlement risk in foreign-exchange markets, which became correspondingly known as Herstatt risk.

The Herstatt crisis had important policy consequences. In the subsequent months of 1974, Germany established the Liquiditäts-Konsortialbank [de] and, at the international level, central bankers created the Basel Committee on Banking Supervision.^[1] With considerably more delay, concerns about Herstatt risk were revived in the late 1980s and 1990s and resulted in the creation of CLS Bank, operational since 2002 as a global foreign exchange market settlement utility.