THE DEVELOPMENT OF INTERNATIONAL CORRESPONDENT BANKING IN THE USA 1970-1989
December 2021 | Global Correspondent Banking 1870–2000 Working Paper Series, Vol.1, No.1 | University of Oxford.
Abstract
How did the global payments system cope with the surge of internationalisation of banking in the 1960s–1980s? Using archival evidence and other contemporary sources, this paper addresses the innovations in the trans-Atlantic payments system that supported liberalised payments in the 1970s and 1980s. The specific focus is the system’s early development in the midst of innovation in ICT, disruption to the international monetary system and a series of high-profile bank failures that challenged the foundations of cross-border inter-bank relations. We find that, although the New York Clearing House developed a private sector solution to the rising number of cross-border payments in the early 1970s, pressure from the Federal Reserve after a payments crisis in 1974 encouraged further reform. The pace of growth of cross-border payments outstripped technological solutions and the private sector system was left with important vulnerabilities until the late 1980s. This emphasised the importance of reinforcing trust in the system through regulation as it grew more complex.
Keywords
Correspondent banking, New York financial centre, payments system, CHIPS, New York Clearing House, Herstatt Risk, international banking
