FX Risk Management

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Foreign exchange risk arises when payments are made or received in a foreign currency. In recent times, currency volatility has made life extremely difficult for finance directors. Local businesses must formulate an effective strategy to manage foreign exchange risks. At First Trust Bank we offer a comprehensive suite of foreign exchange services and professional guidance that helps businesses improve their risk management practices.

How Spot Foreign Exchange works:

An exchange rate is agreed today for a transaction that will take place within two days time.
This approach can is best described as a 'wait and see' approach.
Businesses buy or sell an amount of currency as and when an invoice is due or when payment is received.
Typically, an importer buys a draft or makes a international funds transfer and an exporter negotiates a cheque or converts an incoming international payment.

Benefits of Spot Foreign Exchange:

The company can benefit if exchange rates have moved favourably from the time the actual business transaction is struck until the time payment is effected.
The major disadvantage of Spot Foreign Exchange is that a business can be at the mercy of the foreign exchange markets until the rate is agreed

Eligibility

All First Trust Bank clients can book Spot Foreign Exchange through their Branch.

How a Forward Foreign Exchange Contract works:

An exchange rate is agreed today for a transaction that will take place at some stage in the future.

Benefits of Forward Foreign Exchange Contracts:

This approach eliminates exchange rate uncertainty.
Whilst the exchange rate is agreed, no payments are made until the underlying business transaction occurs.
A time option is available. This means that the transaction need not be made on a specific day but can be made between two agreed dates.
The contract can be utilised in tranches between the two agreed dates.
Ultimately, forward contracts provide exchange rate certainty for future transactions and play a central role in safeguarding profit margins.
The particular business transaction is not at the mercy of foreign exchange volatility

Eligibility

First Trust Bank clients can book Forward Foreign Exchange Contracts through their Branch. A forward contract facility must be arranged with the Branch prior to a contract being struck. Deals can be booked for amounts of £10,000 upwards.

Legal Notice

Terms and Conditions apply and are available on request.

First Trust Bank is a trademark of AIB Group (UK) p.l.c. (a wholly owned subsidiary of Allied Irish Banks, p.l.c.), incorporated in Northern Ireland. Registered Office, 4 Queen's Square, Belfast, BT1 3DJ. Registered Number, NI 18800. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. First Trust Bank is covered by the Financial Services Compensation Scheme, established under the Financial Services and Markets Act 2000.

First Trust Bank subscribes to the Lending Code and is covered by the Financial Ombudsman Service. Details of the Lending Code are available on request from any First Trust Bank branch or from the Lending Standards Board.

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