Business clients Managing risks Currency risk Forward deal

Currency risk

Forward deal helps manage the risk from future changes in the exchange rate.

Conditions

  • When the deal is made, an exhange rate is agreed upon, at which You can buy or sell the currency at a set time in the future.
  • Forward deals can be made in most currencies and with a period of up to one year.
  • The price of forward deal, or forward rate, depends on the current exchange and interest rates and is calculated through them.
  • The minimum amount of a forward deal is 20 000 EUR (or its equivalent) and minimum yearly trades´ amount 100 000 EUR.

The client and the bank will confirm the conditions of the deal (amount, value date, forward rate) and the collateral amount, which the client then submits to the bank to ensure that the deal is made.

The bank may demand the provision of additional collateral from the customer for the duration of a transaction after each transaction has been entered into. If the bank demands the provision of collateral or additional collateral from a customer, the bank shall separate the funds that are the object of financial collateral from all other funds held in the customer’s account. The bank shall transfer the funds agreed between the parties from the customer’s current account in the relevant currency of the deposit to the opened sub-account named the collateral deposit.

The deposit is returned and the finances are moved on the client’s current account at the value date. Depending on the actual incoming and outgoing amounts, the value date of the forward deal can be swapped – by using the swap deal.

To start a forward deal

  • You need a deposit on Your current account, or some other liquid collateral accepted by the bank (or a credit limit), in the amount required by the bank.
  • You need to have signed the Customer Agreement on Financial Instruments.
  • You need to have a limit.