The Sirius Report

There is an extraordinary component of the global financial system that receives remarkably little attention. It involves tens of trillions of dollars in financial obligations that do not appear in conventional debt statistics, are not generally recorded as ordinary borrowing on corporate balance sheets and yet must be settled or refinanced when they fall due. These obligations exist within the foreign-exchange derivatives market, principally through foreign-exchange swaps, forwards and currency swaps. They are used every day by major international banks, pension funds, insurance companies, investment managers and multinational corporations.

According to the Bank for International Settlements, outstanding dollar-payment obligations associated with these instruments exceeded $80 trillion in its landmark 2022 analysis. To appreciate the magnitude of that figure, it was substantially larger than the entire annual output of the United States, China and the European Union combined. Yet most