The high cost of international money transfers isn't caused by slow technology or messaging systems like SWIFT, but by a 'settlement-capacity' problem where banks must keep billions of dollars sitting idle.
April 1, 2026
Original Paper
Reducing Correspondent Banking Capital Requirements - Through Multilateral Netting with Threshold-Triggered Settlement 
SSRN · 6438004
The Takeaway
The paper reveals that banks currently have to 'pre-fund' accounts in every country they serve, locking up massive amounts of capital. By switching to a 'threshold-triggered' system using assets they already own, a small group of 15 banks could save up to $400 million a year without any changes to how they communicate.
From the abstract
The correspondent banking model remains expensive because banks must keep bilateral Nostro/Vostro balances pre-funded across the corridors they serve. That requirement ties up capital even before a payment is sent. This paper argues that the problem is not primarily a messaging problem; it is a settlement-capacity problem. It proposes a multilateral coordination mechanism built around three linked elements: real-time multilateral netting, threshold-triggered rolling settlement, and legally enfor