day, but this came to a net 9 trillion yen or a quarter of the amount of the original transactions. 2 second, in the event of a participant ’ s default, a ccp guarantees performance of delivery and payment obligations to other participants ( chart 3 ). in such an event, the ccp becomes unable to receive securities from the participant in default, which would result in the failure of delivery to other participants on the settlement day, the so - called " settlement fails. " it would immediately attempt to purchase securities from the market and therefore resolve settlement fails. 3 for payment obligations, the ccp borrows funds to make payments to other participants as scheduled. it repays funds by liquidating the securities that were originally intended for delivery to the participant in default. a ccp cannot function well without appropriate risk management measures. a ccp needs to be equipped with contingency liquidity funding arrangements to continue the performance of payment obligations. moreover, it needs to have adequate financial resources and losssharing arrangements among the participants, so as to be prepared for potential losses arising from the closing - out of a defaulter ’ s outstanding positions. jgbcc and other ccps in japan have been working to strengthen risk management measures. thanks to these continuous efforts, the existing risk management controls have proved effective and the operations of ccps have been ensured during the recent financial crisis. with lbj ’ s default, jgbcc had to fund significant amounts of liquidity very quickly. nevertheless, it managed to raise funds from external sources using the existing liquidity arrangements. in addition, while jgbcc and other ccps suffered losses from the closingout of lbj ’ s outstanding positions, those losses were fully covered by collateral that lbj provided. 4 having said that, there is still room for improvements in ccps ’ risk management framework. moreover, there is also a long - standing issue with respect to jgbcc. the netting ratio of jgbcc is not high, because not all major market players participate in jgbcc. although it is fundamentally a matter between jgbcc and the participants, a higher netting ratio would benefit all market participants. from this perspective, the bank expects ccps in japan to provide the lead in efficient and safe clearing business with strengthened risk management framework. for monthly statistics of major payment and settlement systems in japan, see the payment and settlement statistics released on the bank ’ s web site ( http : / / www. boj. or.

##rrency collateral for settlement in their accounts ( chart 2 ). transfer of funds between cls and its participants takes place on their accounts at the central banks, currency by currency. cls deals with seventeen eligible currencies, and the cls settlement process takes place during a five - hour window corresponding to the morning hours in europe, early evening in japan, and very early morning in the united states, respectively. cls has played a critical role throughout the recent financial crisis. on an average day, cls settles 3 to 4 trillion u. s. dollars, which accounts for almost 60 percent of the foreign exchange settlements worldwide. 1 while the value further surged immediately following the failure of lehman brothers, cls completed settlement of the significant amounts of payments in a stable manner. the effective functioning of cls was particularly important because, over the course of the recent global financial crisis, the functioning of the u. s. dollar funding market was severely impaired and non - u. s. financial institutions, including japanese and european financial institutions, became increasingly dependent on foreign exchange swaps as a source of u. s. dollar funding. if cls ’ s pvp mechanism had not existed and financial institutions had confronted foreign exchange settlement risk under the rapid undermining of confidence in the soundness of financial institutions, they would have had much more difficulty in funding u. s. dollars through the foreign exchange swap market. simultaneous multi - currency settlement in cls acted as a bulwark to protect against the intensifying shock of the global financial crisis. b. ensuring settlement of jgb transactions a second example is that jgb transactions continued to be settled without serious problems despite the significant shock arising from the failure of lehman brothers japan ( lbj ). i will explain the jgb settlement process, focusing on a central counterparty ( ccp ) called japan government bond clearing corporation ( jgbcc ). see bank for international settlements, committee on payment and settlement systems ( 2008 ). a ccp replaces a bilateral contract between parties with two contracts between the ccp and the individual party. thus, the ccp becomes a buyer to every seller and a seller to every buyer. this brings two benefits. first, the ccp offsets a large number of obligations and claims across the participants, thereby reducing the amount of securities and cash needed for settlement. for example, in september 2009, an average of 35 trillion yen worth of jgb transactions was submitted to the jgbcc every