®

® CLS and the CLS Logo are registered trademarks of CLS UK Intermediate Holdings Ltd © 2009 CLS UK Intermediate Holdings Ltd.

www.cls-group.com

Maintaining trust in international transactions - the

CLS experience

Peter SlaterDeputy CEO, CLS Group

2

What is CLS?

CLS Bank operates the world’s largest multi-currency cash settlement system, settling payment instructions for over 50% of the world’s daily

FX transactions.

CLS Settlement is the only means by which settlement risk can be eliminated with finality using a unique combination of payment versus

payment in central bank funds, multilateral payment netting and a standard legal framework, supported by a robust and resilient

infrastructure.

3

CLS - The market standard

Eliminates FX settlement risk in payment instructions for trades executed in seventeen major currencies and six instruments:

FX spot, FX swapsFX forwards Non deliverable forwardsFX option exercises Credit derivatives

Settles matched trades on a payment versus payment (PvP) basis- Guarantees return of principal amount in the event of counterparty failure

Multi-laterally nets all cash obligations per value date

Settlement is final using central bank funds and operating within a standard legal framework & operating rules

Supported by a robust and resilient infrastructure - One of six critical market infrastructures overseen by FRBNY

4

CLS milestones

September 2002: Live with 39 Members and 7 currencies

September 2003: 4 more currencies added ( to 11)

February 2004: First Fund FX transaction settled

December 2004: 4 more currencies added ( to 15)

November 2007: Number of third party participants exceeds 2000

September 2008: Record volume - over 1.5 million instructions in one day

December 2007: NDF service goes live

December 2007: Credit derivatives settlement goes live for DTCC

March 2008: Record value settled - $10.3 trillion

December 2007: Full “out of region” resilience

May 2008: Live with Israeli Shekel and Mexican Peso – 17 in total

5

CLS passing the test in recent market events

W/c 15 September: exceptional sustained volumes and values - Settlement of USD 26.5 trillion and 4.4 million instructions for the week

Collapse of Lehman Brothers:- CLS community worked together - Minimal number of trades were rescinded/withdrawn - All Lehman trades in CLS were settled - some for very large amounts

Additional significant trading activity (daily average of 879K).

Increased level of AIG related instructions submitted on peak volume day

New peak volume day of 1.5 million instructions on 17 September

CLS worked exactly as designed, huge settlement risk values eliminated

6

CLS volumes and values

Feb-08Mar-08

Apr-08

May-08

Jun-08Jul-08

Aug-08

Sep-08Oct-0

8

Nov-08

Dec-08Jan-09

Feb-09

100150200250300350400450500550600650700750

Aver

age

daily

vol

ume

settl

ed

(Sid

es 0

00's

)

$3 trillion daily($10.3 trillion peak day)

579,000 instructions daily(1,554,166 peak day)

Volume

Value

Feb-08Mar-08

Apr-08May-0

8Jun-08

Jul-08

Aug-08Sep-08

Oct-08

Nov-08

Dec-08

Jan-09

Feb-09

100015002000250030003500400045005000

Valu

e ($

Bn)

7

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

Jan

04Fe

b 04

Mar

04

Apr 0

4M

ay 0

4Ju

n 04

Jul 0

4Au

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Sep

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ct 0

4N

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4Ja

n 05

Feb

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5Ap

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May

05

Jun

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Aug

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Oct

05

Nov

05

Dec

05

Jan

06Fe

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Mar

06

Apr 0

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Jul 0

6Au

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Sep

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Feb

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May

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Jun

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Aug

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Oct

07

Nov

07

Dec

-07

Jan

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Mar

-08

Apr-

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ay-0

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Jul-0

8Au

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Sep-

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n-09

Feb-

09

Bank: 322 Corporate: 27 Non-Bank Financial: 62 Fund: 4275

Total: 4686

CLS participation

7060

23

010203040506070

Shareholders Members Third PartyProviders

8

2008 achievements

Reserve Bank of New Zealand live as first Central Bank Member

Bank of China HK, Shinhan Bank, Bank Leumi and Bank Hapoalim live

NDFs – 15 banks completed trialling required to go live

CLS settled over 142 million instructions with a value of over $1

quadrillion during the year for the first time

Increased capacity to process peak instruction volume of two million.

100% settlement of all transactions submitted to CLS in 2008

9

The Structure

CLS Group Holdings

Representative officeTokyo

CLS Services London

CLS Bank International New York

Settlement Member User Member

Third party service provider

Third parties

Shareholders

10

CLS governance

CLS service is delivered by CLS Bank

Co-operative utility – charges for account and transactions

Pricing and product strategy determined by the Board in conjunction

with working groups covering products and pricing

Regulated by Federal Reserve and reporting to the Committee on

Payment and Settlement Systems (CPSS) Board

11

How CLS service works

CLS is a Bank

Holds accounts with all central banks (17) of the currencies settled

Settlement Members (58) each have a multi-currency account with CLS

Linked settlement takes place on the books of CLS

Members have to pay in their net short positions each day

Members receive back their net long positions

CLS Bank opens and closes each day with a zero balance on all accounts

Members offer CLS access to their own customers (CLS third parties)

12

Settlement Accounts with 17 central banks

13

06:30 07:00

Fundingcompletion

Funding &settlement

On-going submission of instructions

How CLS works - overview

09:00 12:00

14

CLS operational timeline

15

CLS Value: Members

OperationsEfficiency

Improved TradingCapacity

ReducedFunding

RiskElimination

RISK ELIMINATION Elimination of settlement risk Reduced payment risk

through reduced number of pay ins and pay outs per day

Reduced Operational Risk through extensive operational controls & market standardisation

IMPROVED TRADING CAPACITY

Maximisation of trading capacity and limits

Expanded range of counterparties

Capacity to grow

CLSValue

OPERATIONS EFFICIENCY Zero fails -reduced costs on

recons, investigations Reduced number and cost of

payments Elimination of settlement

failure and cost of interest claims for late settlement

REDUCED FUNDING Gross funding levels

reduced by 95% for all CLS currencies

“Best in class” cash forecasting, faster matching and position reporting

16

CLS Bank’s currency eligibility requirements

Currency Minimum sovereign rating of BB-/Ba3 Convertible and transferable

Strong support from the local Central Bank

Legal Can achieve finality of settlement and pay-ins Acceptable Rule of Law

Stability of the local banking system

Can meet operational standards Timed pay-ins via RTGS SWIFT standards

Business case acceptable for both CLS and local market

17

Benefits of currency inclusion in CLS

Should a currency wish to join CLS, it can benefit in several ways:

Supports the internationalisation of the currency

Positions the currency as one of the most important settlement

currencies in the world

Local banking system will receive the risk, liquidity and efficiency

benefits of CLS participation

Potential benefits to local economy through increased cross border

trading and investment

18

FX market developments

Sell side consolidationInterbank share of trading declining; 43% of global FX turnover in 2007 – 53% in 2004.*

Expanded buy side activity driving volume growthShare of global FX turnover between banks and other financial institutions, including hedge funds and pension funds, rose from 33% in 2004 to 40% in 2007.*

Emerging market currencies growth19.8% of global FX turnover in 2007 - up from 15.6% in 2004.*

Computer based trading showing strong growth, higher volumes, lower average values

Major market focus on credit and settlement risk*Source: BIS Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity in 2007

19

Looking to the future

Stay the standard for FX settlement – the ‘one stop shop’ Support volume growth – aggregation industry solution Increase currency coverage

2010: Chile, Turkey2011: Brazil & Thailand

Increased participation

Other potential services:Locally Settled CurrenciesLiquidity management and same day settlementExplore enhanced risk mitigationInformation services

20

Looking to the future

Value based pricing evolution

Become the standard for NDFs and option premiums

Meet market needs for cash settlement from credit derivatives in partnership with DTCC

Deliver sustained increase in shareholder value

®

® CLS and the CLS Logo are registered trademarks of CLS UK Intermediate Holdings Ltd © 2009 CLS UK Intermediate Holdings Ltd.

www.cls-group.com

Maintaining trust in international transactions - the

CLS experience

Peter SlaterDeputy CEO, CLS Group