More specifically, local currency bonds can be settled on a Delivery versus Payment (DvP) basis using local currency CBDCs, lowering cross-border and cross-currency transaction costs and risks, not to mention the third time zone problem.9 And using distributed ledger technology (DLT) may make it possible to settle cross-border securities transactions without relying on global custodian banks and securities depositories.
These days, the large, internationally active banks, in particular, are switching more and more to the “originate-to-distribute” model – in other words, they pool credit risks and sell them on – often to investors outside the banking system. By passing on credit risk, banks create additional scope for new lending.