This feels pretty sensationalist to me. The report is irritating because it lumps 80% of the fx ‘debt’ into 1 big bucket of “less than 1 year”. But a huge swath of those transactions are cleared in days.

One of the main reasons to do a currency swap is to handle liquidity mismatched more efficiently than going to the currency markets. Firm a has x dollars now but needs to pay out a fixed y currency 2 days from now. Another firm (or set of firms) has the opposite problem.

A currency swap is agreed to with a fixed exchange rate/ fees which can be much much lower than the market rate as there is no fx rate exposure to hedge. That’s why it’s off balance sheet. It’s perfectly 1:1. There is counterparty risk but it’s much much cheaper and less risky to deal with that than the corresponding credit line plus fx exchange that the swap is replacing.

I can see how it makes central bankers nervous because they don’t have insight into it, but it’s strictly less risky than the alternative.