It is necessary to briefly consider the decoding of income items attributed to certain types of operations. Income from foreign currency accounts clients include commissions for issuing transaction passports, as well as a commission for cashing out foreign currency (since maintaining a clients’ foreign currency account consists of commissions for each transaction, which relate to different types of foreign exchange transactions). This constitutes the main income from this operation. To income from placement of funds include: interest on loans issued (short-term, long-term), deposits placed; placement of funds in foreign currency securities and income from them. To income from international payments include: commission for transfers, collection of payment documents in foreign currency, opening and issuance of letters of credit. Income from conversion operations includes:

Income from an open currency position;

Income from operations on the MICEX on futures and forward contracts.

To income from non-trading operations include: commission charged to clients for servicing plastic cards, income from the purchase and sale of cash foreign currency.

However, it is possible to evaluate the bank’s foreign exchange transactions not only from the point of view of income and expenses, but also to analyze the structure of the bank’s personnel, as well as to carry out relative timing of the work process, and take into account how the payroll fund is distributed across the main departments. If the table for analyzing the profitability of foreign exchange transactions is correlated with the turnover for these types of operations, and all analytical calculations are grouped for clarity into one table and the final results are expressed as a percentage, then the following table will be obtained, which clearly expresses the value for the bank of the main foreign exchange transactions (Table 2.3 .3).

All calculations are based on data from the Federal Depository

bank for the first quarter of 1998. For 100% in table. 2.3.3 takes the profitable work of the foreign exchange department in the first quarter of 1998. From here it is necessary to explain that this structure of foreign exchange operations is still individual in percentage terms for a given bank. Although the general trend in the importance of the above types of foreign exchange transactions, the structure of foreign exchange transactions remains the same in all banks. That is The main operations in terms of profitability, labor intensity, and total costs are:

1) attracting and placing funds that the bank has at its disposal in a given period;

2) conversion operations;

3) non-trading operations.

2.4. Currency risks and methods of their regulation

Currency risk, or exchange rate risk, associated with the internationalization of the banking market, the creation of transnational (joint) ventures and banking institutions and the diversification of their activities and represents the possibility of monetary losses as a result of exchange rate fluctuations.

International banking covers:

currency operations;

foreign lending;

investment activities;

international payments;

international payments;

foreign trade financing;

insurance of currency and credit risks;

international guarantees.

Foreign exchange markets exist to service financial transactions between countries that need to settle trade transactions.

Its participants are market makers, banks, industrial and insurance companies, investment funds, private clients, central banks, and brokers. Market makers quote exchange rates for all other market participants on a regular basis. Banks quote currencies for their clients, but not for other banks. Industrial, insurance companies, investment funds carry out their own foreign exchange transactions and hedging operations through the above-mentioned counterparties. Private clients diversify their investments into different currencies to minimize risks and maximize returns. Central banks are involved in foreign exchange regulation, supervision and foreign exchange intervention. Brokers are engaged in intermediary activities between banks, both national and foreign.

THE CURRENCY MARKET is not only a relationship between banks and their clients. The main characteristic feature of the foreign exchange market is that on it monetary units confront each other only in the form of entries in correspondent accounts. The foreign exchange market is predominantly an interbank market, since it is during interbank transactions that the exchange rate is directly formed. Operations are carried out using various means of communication and communications.

Functions of the foreign exchange market:

Servicing the international circulation of goods, services and capital;

Formation of the exchange rate under the influence of supply and demand;

Mechanism for protection against currency risks and the application of speculative capital;

An instrument of the state for monetary and economic policy purposes.

To serve the foreign exchange market, the concept is introduced exchange rate- the value of one currency expressed in a certain amount of another. To express it accurately, direct and indirect quotes are used.

At direct quotation the variable number of units of national currency expresses the value of foreign currency.

Example: Switzerland: 100 DEM = 85.20 CHF

1 USD == 1.4750 CHF.

At indirect quotation the variable number of foreign currency units expresses the value of the national currency:

Example: UK: IGBP = 1.4900 USD

1 GBP = 2.5600 DEM.

In this case, the transaction currency is always foreign currency, and the estimated currency is the country’s currency.

Currency quotation for commercial and industrial clients who are interested in the quotation of foreign currencies in relation to the national one is based on the cross rate. Cross course- a relationship between two currencies that results in relation to a third currency (usually the US dollar).

Conversion transactions are associated with the emergence of currency risk, which can lead banks to both additional income and losses.

For its part, currency risks are structured as follows: commercial, conversion, translation, forfeiting risks (Fig. 2.4.1 and Fig. 2.4.2).

Commercial risks are associated with the reluctance or inability of the debtor (guarantor) to pay off his obligations.

Conversion risks- these are the risks of currency losses for specific transactions. These risks are in turn divided into: economic risk, translation risk, transaction risk.

Economic risk for a firm is that the value of its assets and liabilities may change up or down (in national currency) due to future changes in the exchange rate.

For a bank, investing in foreign assets will affect the size of the future flow of payments denominated in domestic currency. In addition, the very size of payments to be repaid on these loans will change when converting the value of the foreign currency of the loan into the equivalent in national currency.

Translation risk is associated with differences in the accounting of assets and liabilities in foreign currency. If the currency in which these assets are denominated falls, the value of the assets falls: as the value of assets decreases, the size of the share capital of the company or bank falls. From an economic point of view, more important is transaction risk, which considers the impact of changes in exchange rates on the future flow of payments, and therefore on the future profitability of the firm or bank.

Transaction risk arises from the uncertainty of the domestic currency value of a foreign exchange transaction in the future. Changes and profitability of a firm mean a change in its creditworthiness and therefore it is very important for the bank to be aware of the clients' foreign exchange transactions. In an environment of high instability of exchange rates, one of the ways to protect against currency risks is to choose the contract currency that is most acceptable to counterparties. For the exporter and lender, it is preferable to use a relatively more stable currency. The choice of currency can have a significant impact on the efficiency of trading and credit operations.

When choosing a contract currency, the following factors must be taken into account: forecast of trends in the exchange rate of a given currency in the period between the moment of conclusion of the contract and the timing of payment obligations; the nature of the goods and services sold; traditions established in the commodity market; form of trade organization (one-time transaction, long-term contract, intergovernmental agreement).

Currency conversion risk can be reduced by also applying protective clauses, gold clauses, and currency clauses.

Protective clauses- contractual terms included by agreement of the parties in interstate economic agreements, providing for the possibility of changing or revising the original terms of the contract in the process of its execution.

Golden clause acquired importance during and after the First World War in connection with the abolition of the gold standard in some countries and its virtual disappearance in others. The currencies of these countries began to depreciate both in relation to gold and in relation to the currencies of other countries in which the gold standard continued to function. The reservations were based on the gold parity of currencies, which is the ratio of their gold content. Reservations based on parity were valid both in conditions of free exchange of monetary units for gold, and under reduced (gold - motto and gold - dollar) standards. Gold clauses were widely used as long as the governments of capitalist countries took measures to maintain the market price of gold at the official level. The collapse of the gold pool in 1868 created a double market for gold, making the official price of gold unrealistic and ending the use of the gold clause.

Currency clause- this is the inclusion in a credit or commercial contract of a contractual condition, according to which the amount of payment of the contractual condition is made dependent on changes in the exchange rate

the relationship between the currency of the price of the product (loan currency) and another, more stable currency (reservations). The establishment of different currencies of price and payment in a contract is in fact the simplest form of a currency clause. In this case, the price currency is chosen to be a more stable currency. In the case of a regular currency clause, the amount to be paid is made dependent on the change in the exchange rate of the currency of the clause in relation to the currency of the price. In both cases, the payment amount will change to the same extent as the exchange rate of the reservation currency. For example, the price of goods under the contract is 1 million francs. francs The currency of the reservation is the US dollar. The dollar to franc exchange rate on the date of conclusion of the contract is 10.00 francs, then the amount to be paid will have to increase by 10% and amount to 1.1 million francs, i.e. per 100 thousand francs. more. A currency clause based on a market rate provides for determining the relationship between currencies based on the current quote on the foreign exchange markets. The difference between the seller's and buyer's rates is margin- is a source of income for the bank, through which it covers the costs of the transaction and, to a certain extent, serves to insure currency risk.

For example:

1. New York to London (direct quote);

1 f.st. - $1.6427 - buyer's rate

1 f.st. - $1.6437 - seller's rate.

A bank in New York seeks to sell pounds sterling after receiving

this is more than the national currency (1.6437), and when buying them, you pay less (1.6427).

2. New York at Frankfurt am Main (indirect quotation);

1 dollar - 1.7973 DM - seller's rate

1 dollar - 1.7983 DM - buyer's rate.

A bank in New York, selling stamps, wants to pay fewer stamps for each dollar (1.7973) and receive more stamps upon purchase (1.7983). However, since the exchange rates of individual currencies often experience acute short-term fluctuations, tying the currency clause to any one currency cannot satisfactorily ensure the interests of both exporters and importers. These shortcomings were overcome with the development multi-currency clause, which provides for the recalculation of a monetary liability depending on changes in the exchange rate

the relationship between the payment currency and the basket of currencies selected by agreement of the parties.

The use of a weighted average exchange rate of the payment currency in relation to a set of other currencies reduces the likelihood of sudden changes in payment amounts. Including currencies with different degrees of stability in the basket helps to ensure the interests of both counterparties. The compilation of the basket should be based on an analysis of the past dynamics of the exchange rates of the relevant currencies, their current state and prospects for the period coinciding with the contract term. In addition to multi-currency security clauses, there are a number of clauses that are similar to them in their economic content. Thus, an action similar to a multi-currency clause with a corresponding basket of currencies will have concluding an export contract with the condition of payment in several currencies of an agreed set. For example, maybe The contract amount was agreed to be 60% in US dollars and 40% in German marks.

Broadcast(accounting) risks arise when revaluing assets and liabilities of balance sheets and the “Profit and Loss” account of foreign branches of clients and counterparties. These risks, in turn, depend on the choice of conversion currency, its stability and a number of other factors (see Fig. 17.2). Recalculation can be carried out using the translation method (at the current rate on the date of recalculation) or using the historical method (at the rate on the date of a specific transaction). Some banks take into account all current transactions at the current rate, and long-term ones at the historical rate; others analyze the level of risk of financial transactions at the current exchange rate, and others at the historical rate; still others choose one of two accounting methods and use it to control the entire range of their risky transactions.

Strategically, protection against currency risk is closely is associated with an active pricing policy, types and costs of insurance, the degree of reliability of insurance companies of both the bank itself and its counterparties and clients.

In addition, almost all large banks are trying to form portfolio of its foreign exchange transactions, balancing assets and liabilities by type of currency and maturity. Basically everything external methods Currency risk management is focused on their diversification. For this purpose, the most widely used are forward currency transactions such as forwards, futures, options(both on interbank markets and on exchanges). Currency is sold on a spot basis (with immediate or two-day settlement), swap (spot/forward, spot between different banks) or forward (outright between the bank and the client).

Risks of forfeiting arise when the forfeiter (often a bank) assumes all the risks of the exporter without recourse. But at the same time forfeiting(commercial risk refinancing method) has its own advantages, with the help of which the level of risk can be reduced by:

Simplification of balance sheet relationships of possible liabilities;

Improving (at least temporarily) the liquidity situation, which makes it possible to further strengthen financial stability;

Reducing the likelihood and possibility of losses by insuring possible difficulties that almost inevitably arise during the period of presentation of previously insured claims;

Reduction or even absence of risks associated with fluctuations in interest rates;

A sharp reduction in the level of risks associated with exchange rate fluctuations and changes in the financial stability of the debtor;

Absence of risks and costs associated with the activities of credit

authorities for collecting money on bills of exchange and other payment documents.

But, naturally, forfeiting cannot be used always and everywhere. This is one way to reduce risks.

Currently, the Central Bank of the Russian Federation regularly publishes the so-called "currency basket"- a method of measuring the weighted average exchange rate of the ruble against a certain set of other currencies.

The most common methods of insuring currency risks are

hedging, those. creation of a compensating currency position for each risky transaction. In other words, compensation occurs

one currency risk - profit or loss - another corresponding risk;

currency swap, which has two varieties. The first is reminiscent of parallel loans, when two parties in two different countries provide loans of different sizes with the same terms and methods of repayment, but denominated in different currencies. The second option is simply an agreement between two banks to buy or sell currency at the spot rate and reverse the transaction at a predetermined date (in the future) at a certain spot rate. Unlike parallel loans, swaps do not include interest payments;

mutual offset of risks on assets and liabilities, the so-called “matching” method, where by subtracting currency receipts from the value

its outflow, the bank management has the opportunity to influence their size.

Other transnational (joint) banks (SBs) use the netting method(netting), which is expressed in the maximum reduction of foreign exchange transactions through their consolidation. For this purpose, coordination

The activities of all divisions of a banking institution must be at a high level.

Hedging involves the creation of counterclaims and obligations in foreign currency. Most common type hedging - concluding forward currency transactions. For example, an English trading firm expecting a US dollar receipt in 6 months' time would hedge by selling those future receipts into pounds sterling at the 6-month forward rate. By entering into a forward foreign exchange transaction, a firm creates US dollar liabilities to balance its existing dollar claims. If the dollar exchange rate declines against the pound sterling, losses on the trading contract will be compensated by profits on the forward currency transaction.

The basis for spot transactions, which have an exceptional impact on the currency position, are correspondent relationships between banks. Spot foreign exchange transactions account for approximately 90% of all foreign exchange transactions. The main goals of their implementation are:

Meeting the needs of bank clients in foreign currency;

Transfer of funds from one currency to another;

Carrying out speculative operations.

Banks use spot transactions to maintain minimum required working balances with foreign banks in Nostro accounts to reduce surpluses in one currency and cover requirements for another currency. With this, banks regulate their foreign exchange position in order to avoid the formation of uncovered account balances. Despite the short delivery time of foreign currency, counterparties bear the currency risk for this transaction, since under the conditions of “floating” exchange rates the rate can change within two business days. Conducting foreign exchange transactions and minimizing risks requires certain preparation. At the preparatory stage, an analysis of the state of foreign exchange markets is carried out, trends in the movement of exchange rates of various currencies are identified, and the reasons for their changes are studied. Based on this information, dealers, taking into account their existing currency position, use computer technology to determine the average exchange rate of the national currency against foreign currency. The analysis carried out makes it possible to develop the direction of foreign exchange transactions, i.e. secure a long or short position in the specific currency in which they transact. It should be noted that in large banks, special groups of economists and analysts analyze the position of currencies in the markets, and dealers, based on their information, independently choose the direction of conducting foreign exchange transactions. In smaller banks, the analyst functions are performed by the dealers themselves; They directly carry out currency transactions: using communication means (telephone, telex) they negotiate the purchase and sale of currencies and conclude transactions. The procedure for concluding a transaction includes: selection of exchanged currencies; fixation of rates; establishing the transaction amount;

value transfer of funds; indication of the currency delivery address.

At the final stage, the transaction is carried out on the accounts and its documentary confirmation.

During transactions "spot" The day on which settlements for a particular currency transaction are completed is called the “value date” and is used as protection against risk. International payments cannot be made on a Sunday, holiday or non-working day. That is, calculations must be made on a working day in both countries (Table 17.10).

In Russian banks, the open currency position is determined separately for each foreign currency. For this purpose, the currency positions of the authorized bank are translated into the ruble equivalent at the official ruble exchange rates in effect on the reporting date, which are established by the Central Bank of the Russian Federation. The passive balance is indicated with a minus sign, indicating a short open currency position; The active balance is indicated with a plus sign, indicating a long open currency position. Moreover, in the case of the formation of the authorized bank’s authorized capital in foreign currency, when calculating the open currency position for a given foreign currency, the amount of the passive balance increases by the corresponding amount.

To calculate an open currency position in rubles, the difference between the absolute value of the sum of all long open currency positions in rubles and the absolute value of the sum of all short open currency positions in rubles is determined.

The total value of all long and the total value of all short open currency positions in foreign currencies and rubles must be equal.

In order to limit the currency risk of authorized banks TSB RF The following limits of open currency positions are established:

At the end of each operating day, the total value of all long (short) open currency positions should not exceed 30% of the authorized bank’s own funds (capital);

At the end of each operating day, long (short) open currency positions in certain foreign currencies and Russian rubles should not exceed 15% of the authorized bank’s own funds (capital).

Authorized banks with branches independently set sublimits for open currency positions of the head bank and branches. At the same time, the share distribution of sublimits is carried out by them within the limits provided for by the authorized bank. At the end of each operating day, open currency [positions separately for the head bank and branches of the authorized bank must not exceed the sublimits established by it during the share distribution, and in a consolidated form must be within the limits established as a whole for the authorized bank. Redistribution by the authorized bank sublimits on open currency positions of its head bank and branches can be made by the authorized bank at the beginning of each reporting month.

Financial instruments as a method of insurance

currency risks

Methods of insuring currency risks are financial transactions that allow either to completely or partially avoid the risk of losses arising in connection with an expected change in the exchange rate, or to obtain speculative profit based on on such a change.

Methods of insuring currency risks include:

Structural balancing (assets and liabilities, accounts payable and receivable);

Changing the payment term;

Forward transactions;

Operations such as "swap";

Financial futures;

Lending and investing in foreign currency;

Restructuring of foreign currency debt;

Parallel loans;

Discounting claims in foreign currency;

"currency baskets";

Making payments by branches in a “growing” currency;

Self-insurance.

It should be borne in mind that the methods are: changing the payment term; forward transactions; “swap” type operations; option transactions; Financial futures and discounting of claims in foreign currency are used for short-term hedging, while methods of lending and investing in foreign currency; restructuring of foreign currency debt; parallel loans; making payments to branches in a “growing” currency; self-insurance are used for long-term risk insurance. Methods of structural balancing (assets and liabilities, accounts payable and receivable) and “currency baskets” can be successfully used in all cases. It should be noted that the methods of parallel loans and making payments by branches in a “growing” currency are, in principle, available only to those companies or banks. who have

foreign branches. Some of these methods are difficult to apply.

The essence of the main hedging methods is to carry out foreign exchange transactions before an unfavorable change in the exchange rate occurs, or to compensate for losses from such a change through parallel transactions with a currency whose rate changes in the opposite direction.

Structural balancing is the desire to maintain a structure of assets and liabilities that will allow losses from changes in the exchange rate to be covered by profits received from the same changes in other balance sheet items. In other words, such tactics boil down to the desire to have the maximum possible number of “closed” positions, thus minimizing currency risks. But since it is not always possible or reasonable to have all positions “closed,” you should be prepared for immediate structural balancing actions. For example, if a company or bank expects significant changes in exchange rates as a result of ruble devaluation, then it should immediately convert available cash into the payment currency. In relation to the ruble, this, naturally, can be done only if there is such a right (expressed by entries in an off-balance sheet account or in some other way) or after the creation of a domestic foreign exchange market. If we talk about the relationship between various foreign currencies, then in such a situation, in addition to conversion and a falling currency into a more reliable one, it is possible to carry out, say, the replacement of securities denominated in a “sick” currency with more reliable stock values.

One of the simplest and at the same time most common balancing methods is reconciliation of currency flows reflecting income and expenses. In other words, every time concluding a contract providing for the receipt or, conversely, payment of foreign currency, an enterprise or bank should strive to choose the currency that will help it close, in whole or in part, the existing “open” currency positions.

Change payment deadline, usually called the “leads and lags” tactic, is the manipulation of the timing of settlements, used in anticipation of sharp changes in the exchange rates of the price or payment currency. The most commonly used forms of such tactics include: early payment for goods and services (in case of expected depreciation, i.e., depreciation); acceleration or deceleration of repatriation of profits, repayment of loan principal and payment of interest and dividends; regulation by the recipient of foreign currency funds of the timing of conversion of proceeds into national currency, etc. The use of this tactic allows you to close short positions in foreign currency before the exchange rate rises and, accordingly, long positions before it falls. The possibility of using such a method, however, is largely determined by the financial conditions of foreign trade contracts. In other words, contracts should provide in advance for the possibility of early payment and clearly stipulate the amount of penalties for timely payment. In the latter case, a delay in payment due to an expected change in the exchange rate will be justified only if the savings resulting from payment at the new rate exceed the amount of the accrued penalty.

Since 1975, banks have been used in mainly new methods of regulating currency risks. For this purpose, three new instruments were created: swaps, derivatives contracts for financial instruments (forwards and futures) and options, which we will consider in detail.

Forward operations to insure currency risks are used to avoid risks in foreign currency purchase and sale transactions. A forward foreign exchange contract is an irrevocable and binding contract between a bank and its client to buy or sell a specified quantity of a specified foreign currency at an exchange rate fixed at the time the contract is entered into, for execution (i.e. delivery of the currency and its payment) at a future time, specified in the contract. This time represents a specific date, or a period between two specific dates.

An English exporter issues an invoice under a foreign trade contract, which provides for payment 6 months after shipment of the goods. Moreover, if the exporter does not enter into a forward contract, he receives the currency within the period specified in the spot contract and sells the currency to his bank at the current spot price against GBP. However, the spot has changed since the conclusion of the contract and now, depending on the market situation, the exporter will receive more or less in exchange for foreign currency. Therefore, the exporter bears currency risk. But, if the exporter enters into a forward contract, then the bank agrees to buy foreign currency from the exporter for GBP in 6 months. The bank agrees to do this at a fixed rate, so there is no risk for the exporter and he sells the currency to his bank at the current forward rate against GBP. So, for example, in a spot operation, the amount of coverage for 180 days at the spot rate is 1.7400, and taking into account the premium on the forward contract (premium for 180 days 171 points -0.0171) at the forward rate - 1.7571, provided that The forward rate is higher than the spot rate.

Features of forward transactions include:

The existence of a time interval between the moment of conclusion and execution of the transaction;

The exchange rate is determined at the time the transaction is concluded. Exchange quotation bulletins publish the rate for spot transactions and premiums or discounts to determine the rate for forward transactions for different periods, usually 1, 3 or 6 months. If a currency in a forward transaction is quoted at a higher price than for immediate delivery on spot terms, then it is quoted at a premium. A discount or discount means the opposite. A fixed-term rate that takes into account a premium or discount is called an outright rate. With a premium, the currency is for a period more expensive than the cash rate, with a discount it is cheaper. Having the value of the premium and discount, the outright rate is calculated.

A forward foreign exchange contract can be either fixed or optional.

Fixed forward foreign exchange outright contract is a contract that must be performed on a specific date in the future. For example, a two-month forward fixed contract entered into on September 1st must be executed on November 1st, i.e. after two months.

In accordance with by letter of the Central Bank of the Russian Federation dated December 23, 1996 No. 382 a settlement forward is defined as a combination of two transactions - the purchase and sale of foreign currency for a period with a pre-fixed rate and the simultaneous acceptance of an obligation to sell and buy the same amount of foreign currency on the date of execution of the forward transaction at a rate that is subject to determination in a future period (for example, it will be fixed on the MICEX on a predetermined day). These contracts do not actually involve the conduct of foreign exchange transactions, since their conclusion does not initially involve the delivery of the underlying foreign currency asset. Settlements under these contracts are carried out exclusively in rubles in an amount that represents the difference between the value of the underlying currency asset at the initially fixed rate and its value at the rate determined in the future period. However, due to the fact that by concluding such contracts, banks assume exchange rate risks, these contracts are taken into account when calculating the open currency position. According to Letter to the Central Bank of the Russian Federation dated December 23, 1996 No. 382 An open currency position at the time of concluding a contract is created by a forward transaction for the purchase and sale of foreign currency with a fixed rate. The forward transaction is accounted for in off-balance sheet accounts in accordance with Instructions of the Central Bank of the Russian Federation dated June 10, 1996 No. 290. At the same time, the obligation for a counter transaction on the date of conclusion of the derivatives contract does not have independent significance from the standpoint of determining the open currency position of the counterparties. Its functional role in a settlement forward is reduced to the formation of a mechanism for playing on exchange rate fluctuations, which is, in essence, a settlement forward. At the same time, when executed, the counter transaction affects the size of the open currency position, like any conversion operation.

The exchange rate for futures transactions differs from the corresponding rate for cash transactions. When the rate for a futures transaction is higher than the cash currency rate, the corresponding premium to the cash rate is called a bonus. If the rate for a futures transaction is lower, then the discount from the cash rate is called discount.

The option forward contract, at the client's option, can be

done either:

At any time, from the date of conclusion of the contract to the specific date of its implementation;

During the period between two specific dates.

The purpose of an options contract is to avoid the need to update a forward foreign exchange contract and extend it over several days, as this can be quite expensive in terms of costs per day.

A currency option gives the buyer the right (not the obligation) to buy

or sell: at a certain, pre-agreed date in the future, a certain amount of currency in exchange for another. An option can be compared to insurance - it is used only in unfavorable circumstances.

Unlike a forward transaction, an option is used to protect against high-cost risks with an imprecise basis for calculation of a standard amount, value date, up to 2 years for major currencies only.

Depending on which of the participants and how has the right to change the terms of the transaction, there are: a buyer's option or a transaction with a preliminary premium, a seller's option or a transaction with a reverse premium, a temporary option.

In the case of a call option or a premium transaction, the option holder has the right to receive the currency on a specified date By stipulated rate. The buyer reserves the right to refuse to accept currency by paying the seller a premium for this as compensation. In a put option or reverse premium transaction, the option holder can deliver the currency on a specified date at a specified rate. The right to refuse the transaction belongs to the seller, and he pays a premium to the buyer as compensation.

Variety option transactions is a time option, which historically was preceded by a rack transaction with the purpose of simultaneously conducting speculative transactions in anticipation of an increase and decrease in the exchange rate of a currency. Such an option provided by the bank to the client is an option (from English - the right or subject of choice) in relation to the period of time when the currency exhibition will be carried out, and such a transaction must be executed before the agreed date. For this operation, the premium payer has the right to demand execution of the transaction at any time during the option period at a previously fixed rate. Thus, the participant in the transaction pays a premium for the right to choose the most favorable current exchange rate for the conversion of the currency received as a result of the option transaction. In this case, the premium does not play the role of compensation, since during the option period it is impossible to refuse to execute the transaction. When executing a transaction, counterparties specify which of them will act as the seller and which will act as the buyer. Then one of them, having paid a premium to the other, either buys the currency or sells it. This transaction is more profitable for the participants, the greater the fluctuations in the exchange rate.

So, currency option are not the same thing as forward foreign exchange option contracts. Unlike a forward foreign exchange contract, an option does not have to be exercised. Instead, when the expiration date of a currency option arrives, the owner can either exercise the right to exercise the option or allow it to expire by avoiding the transaction, i.e. simply by refusing the option.

In accordance with Instruction of the Central Bank of the Russian Federation dated May 22, 1996 No. 42“tomorrow” and “spot” transactions refer to transactions with immediate delivery of funds. These transactions are carried out according to the bank's balance sheet on the date of delivery of funds for them. The inclusion of these transactions in the reporting of open currency positions is carried out in accordance with off-system accounting data (depending on the internal accounting rules in force in the bank) at the time of conclusion of the transaction. In reports on open currency positions, “tomorrow” and “spot” transactions are reflected in the “Balance” column.

A “swap” transaction consists of two transactions:

Cash transaction (with immediate delivery of funds), which is taken into account off-system until the execution date (valuation) and in the balance sheet on the corresponding value date;

A forward transaction, which until the moment of movement of funds is accounted for on off-balance sheet accounts, and on the date of execution - in the balance sheet.

Classic currency swap transaction i.e., a “spot” + “forward” transaction is a foreign exchange transaction that combines the purchase or sale of a currency on the terms of a cash “slot” transaction with the simultaneous sale or purchase of the same currency for a period at the forward rate, adjusted to take into account the premium or discount depending on exchange rate movements. Thus, a swap transaction is a combination of a spot transaction and a reverse forward transaction, with both transactions executed with the same counterparty at the same time; both transactions have the same transaction currency; For both transactions, the transaction currency amount is the same.

When comparing swap transactions and transactions with a temporary option, it should be noted that transactions with a temporary option provide complete protection against currency risks, while swap transactions only partially insure against them. This is due to the fact that when conducting swap transactions, a currency risk arises due to a change in the opposite direction of the discount or premium in the period between the day the transaction is concluded and the day the currency is delivered.

Swap operation with interest rates involves an agreement between two parties on mutual interest payments for a certain amount in one currency, for example, when one party pays the other interest at the floating interbank interbank rate LIBOR, and receives interest at a fixed rate. Operation "swap" from currencies oi means an agreement to exchange fixed amounts of currencies, i.e. both parties exchange loan obligations. The last two operations can be combined, i.e. represent “swap” with currency and interest rates at the same time. This means that one party pays principal in one currency and interest at a floating rate of LIBOR in exchange for receiving the equivalent amount in another currency and interest at a fixed rate.

Interest rates on loans provided on the European market may be based on the opening bank's interest rate, or LIBOR.

LIBOR is the rate for placing three-month deposits on the London interbank market. The main interest rates for large banks on the London interbank market are announced every day at 11.00 local time 2 working days before funds are disbursed. LIBOR rates are fixed by the British Bankers Association based on quotes from 16 international banks. A margin is added to it, depending on the financial condition of the borrower, market situation, and loan repayment period.

LIBID is the rate for attracting deposits on the London interbank market. This is the prime London prime deposit rate for banks of the same class. LIBID rates are not fixed; they are 1/8% lower than LIBOR.

A swap can be used to prolong a forward contract, to cover currency risk by carrying out spot and swap transactions as an investment of liquid funds.

A transaction in which a foreign currency is sold on a spot basis with its simultaneous purchase on a forward basis is called a “report”. A transaction where there is a purchase of foreign currency on a “spot” basis and its simultaneous sale on a “forward” basis - deport.

Swap transactions are carried out by agreement between two banks, usually for a period of one day to 6 months. These transactions can be carried out between commercial banks; commercial and central banks and the central banks themselves. In the latter case, they represent mutual lending agreements in national currencies. Since 1969, a multilateral system of mutual currency exchange has been created through the Bank for International Settlements in Basel based on the use of swap operations.

Sometimes swap operations are carried out with gold. Their goal is to retain ownership of it and at the same time acquire the necessary foreign brand for a period.

Swap transactions are convenient for banks: they do not create an open position (a purchase is covered by a sale), and they temporarily provide the necessary currency without the risk associated with changes in its exchange rate. Swap operations are used for:

Conducting commercial transactions: the bank sells foreign currency on the terms of immediate delivery and at the same time buys it for a period. For example, a commercial bank, having excess dollars for a period of 6 months, sells them into national currency on a spot basis. At the same time, taking into account the need for dollars in 6 months, the bank buys them at the forward rate. In this case, a loss on the exchange rate difference is possible, but in the end the bank makes a profit by providing national currency on credit;

The bank’s acquisition of the necessary currency without currency risk (based on coverage by a counter-transaction) to ensure international settlements and diversify foreign exchange reserves. Currency futures are also used to insure currency risk.

Futures at exchange rates- These are contracts to buy or sell a certain amount of currency at some date in the future. In this they are similar to forward foreign exchange contracts, but, unlike forward contracts, they:

Very easy to cancel;

They are concluded for a fixed amount,

Sold on official exchanges (for example, the London International Financial Futures Exchange - LIFFE was opened in 1992);

Provides that futures traders must pay “cash margin” (i.e., pay “money in advance”) to exchange dealers to ensure that futures obligations are met.

Exchange rate futures traders on LIFFE are called dealers (usually banks). They operate with large sums of money and are looking for a way to avoid currency risks.

Conclusions on the second chapter:

The economic foundations of foreign exchange transactions and the problems of their regulation are considered. As for the experience of currency regulation, we can confidently note that the current system of currency regulation and currency control is still very imperfect in its level. To form a complete working system, it is necessary to complete a number of strategic tasks. This includes the formation of a clear legislative framework for currency regulation, a clear distribution of responsibilities of all currency control bodies and agents, and improved information support for the work of currency control bodies and agents, as well as the implementation of centralized investment programs, primarily in the production sector.

With all the significance of these measures in the field of currency regulation, only a fundamental change in the situation, strengthening the economic security of the country, ensuring its worthy place in the world economic system, implementing a decisive structural restructuring of the economy, a major redistribution of resources into the most efficient areas and branches of modern production, creating an adequate financial -technical base can ensure the functioning of a full-scale modern foreign exchange market.

The classification of foreign exchange transactions is considered. In accordance with the law “On Currency Regulation and Currency Control,” all currency transactions are divided into: current and transactions related to the movement of capital. Currently, current foreign exchange transactions have acquired wider significance. In this case, deferred payment is provided for a minimum period. The limited range of foreign exchange transactions related to the movement of capital is justified by the greater risks involved in their implementation, as well as more complex registration (obtaining permission from the Central Bank of the Russian Federation for these transactions). It is necessary to clarify that all foreign exchange transactions are closely interrelated, so it is very difficult to clearly classify all transactions with foreign currency. Moreover, operations can be classified into several main types of foreign exchange transactions.

As a result of the internationalization of the banking market, the creation of transnational enterprises and banking institutions and the diversification of their activities, banks are constantly exposed to currency risks, which represent the possibility of monetary losses as a result of exchange rate fluctuations.

Ultimately, the new financial instruments considered, which are forward contracts, swaps, options and futures, allow you, first of all, to protect yourself from currency risks, as well as to finance your activities at lower costs, and to have certain types of resources that would otherwise be unavailable. Finally, these are instruments of speculation. In addition, financial instruments are a powerful factor in global financial integration: they establish a direct link between the international market and the domestic markets of various countries. This integration provides many benefits, but does not come without inconveniences and risks. This explains the fact that monetary authorities and governments of leading industrialized countries are concerned about ensuring certain regulation of international markets and foreign exchange risks.

As a result of the analysis, a set of measures is proposed to increase the bank’s profitability from foreign exchange transactions.

At the present stage of development, increasing profits is possible by improving already implemented operations and introducing new ones.

Based on the analysis of foreign exchange transactions carried out in this course work, the following ways to increase the profitability of a bank’s foreign exchange transactions are proposed:

• - use of account balances overnight;
• - operations to execute forward contracts for the purchase and sale of currency;
• - optimization of interest rates on foreign currency deposits and loans;
• - optimization of the work of bank currency exchange offices;
• - opening of new ATMs;
• - issue of multicurrency smart cards;
• - account management via the Internet, mobile phones;
• - work in the Reuters system.

Let us consider the feasibility and profitability of using the most profitable of the proposed measures in banking practice.

1. Use of balances on correspondent accounts overnight. It is necessary to additionally introduce an operation to place balances on correspondent foreign currency accounts in other banks on deposit.

It is advisable to place balances on foreign currency correspondent accounts overnight, that is, at night. Deposits with long placement periods are inappropriate, since in this case the liquidity and solvency indicators of the bank deteriorate. There will also be a need to reserve certain amounts in client accounts, which will entail the payment of higher interest to bank clients than interest on balances on clients' foreign currency accounts.

2. Operations to execute forward contracts for the purchase and sale of currency. The content of this service is as follows. On the day of the forward sale, the client is offered to pay a small part of the funds for the opportunity, after a certain time, to buy currency from the bank at a predetermined rate or to sell it the currency on the same terms. The amount that the customer pays at the time of sale is called commission or bank income. By the time the forward is executed, the content of the operation is reduced to a regular non-trading operation. The client also makes a certain deposit to confirm the seriousness of intentions for the period between the sale and execution of the forward.

The benefit of the bank in providing this service is twofold:

• - free funds are attracted;
• - it becomes possible to almost completely plan work in non-trading operations, since it is known how much and at what rate foreign currency should be sold (purchased) after a certain period of time.

It should also be remembered that carrying out these operations is associated with a certain risk for the bank - a sharp change in the exchange rate against the previously planned one is possible and you will have to sell or buy currency on unfavorable terms. This risk can be minimized by using the following methods:

• - calculate forward rates;
• - clearly maintain a payment calendar for these obligations;
• - carry out full-scale forward non-trading operations, coordinating distant obligations for the purchase and sale of currency.

The operation with a forward has certain features. It provides for the bank and the buyer (legal or individual) to purchase the right to acquire (sell) currency assets (forward) on the date specified by the terms of the forward, with the fixation of the selling price at the time of conclusion (sale) of the forward.

The buyer of a forward has the right to refuse to purchase (sell) currency or the right to resell the forward to third parties.

The holder of a forward can be either an individual or a legal entity, but only an individual can exercise his right to purchase (sell) foreign currency.

The holder of a forward can exercise his right to purchase (sell) currency only within the period determined when concluding the forward. If the holder does not exercise his right to purchase (sell) currency within the period specified by the forward, the latter loses its force and is no longer binding on the bank.

The formula for calculating the deposit when implementing a forward for the purchase of foreign currency is as follows:

AMOUNT OF DEPOSIT = (A-B)*360/C*K*Ost, (3.1)

where A is the expected market exchange rate at the time of implementation of the forward;

B - selling rate under forward terms;

(A-B) - the difference in rates that must be covered by attracting a deposit and using it as a credit resource;

C is the period for fulfilling forward obligations, days;

K is the coefficient for attracting bank resources in comparison with the NBU discount rate;

Ost. - NBU discount rate at the time of conclusion of the forward.

The formula for calculating the deposit for forwards for sale has a similar form, only the elements in brackets are swapped:

AMOUNT OF DEPOSIT = (B - A)*360/C*K*Ost, (3.2)

where B is the purchase rate under the terms of the forward;

A - the bank's expectations regarding the minimum purchase rate.

The general principle of implementing a forward comes down to the following: it can be attractive at the exchange rate, and possible losses in the exchange rate should be easily covered by the benefits from using the deposit amounts as a resource.

3. Optimization of interest rates on foreign currency deposits and loans. Price competition is to provide the most favorable financial conditions for similar services. For example, the highest interest rates or the lowest tariffs. The use of this type of competition gives fairly quick and good results.

Undoubtedly, one of the most important and decisive factors stimulating clients to save resources in this particular bank is the size of the interest rate on the deposit, the interest calculation regime, etc., that is, the bank’s interest rate policy.

The size of the deposit interest is set by a commercial bank independently, based on the NBU discount rate, the state of the money market and its own deposit policy.

In order to interest depositors in placing their funds in the bank, various methods of calculating and paying interest are used. Let's look at some of them.

It is attractive for depositors to use an interest rate that progressively increases depending on the time the funds are actually in the deposit. This procedure for calculating income stimulates an increase in the storage period of funds and protects the deposit from inflation.

Some banks offer interest payments in advance to compensate for inflation losses. In this case, the investor, when placing funds for a period of time, immediately receives the income due to him. If the agreement is terminated early, the bank will recalculate the interest on the deposit and excess amounts paid will be withheld from the deposit amount.

As foreign and domestic experience shows, the most important incentive for a depositor is the level of interest paid by banks on deposit accounts. Therefore, an obvious measure to attract additional banking resources is to increase the interest rate on deposits.

Based on the results of marketing research, it was found that the elasticity of the interest rate on deposits is 3.6. Those. an increase in the deposit interest rate by 1% will lead to an increase in the volume of attracted funds by 3.6%. It should be taken into account that interest rates for different types of deposits differ significantly, and therefore the average interest rate must be used for calculation. The average interest rate on deposits is calculated as the ratio of interest expenses to all funds attracted to deposits.

However, the constant use of this method leads to increased costs and, consequently, a decrease in the efficiency of the bank. The use of this method is advisable during a period of rapid growth of markets, most of which the bank hopes to conquer.

4. Technologies for carrying out urgent operations. Dealing (operations of financial institutions to manage their assets) on international markets, in fact, is not something new for the current Ukrainian reality.

Dealing on the international currency markets Forex (short for Foreign Exchange) is considered the most profitable. The potential for profit in Forex is significantly higher than in any other financial market. Dealing operations in foreign exchange markets can be carried out through banks that conduct such operations for both legal entities and individuals, providing leverage that varies from 1:20 to 1:50. This means that the client can operate 20-50 times more with the invested amount.

A characteristic feature of operations with futures contracts is that when buying or selling them, not the entire contract amount is paid, but only a deposit amounting to 2 to 5% of the contract value. Thus, it becomes possible to carry out transactions with leverage from 1:50 to 1:20, which significantly increases the monetary potential.

These deals provide virtually unlimited possibilities for speculation. In addition, they are simply necessary for the purposes of insurance (hedging) of price risks when concluding export-import trade transactions.

The attractiveness of international financial markets for domestic investors is obvious. Quotes on world currency markets change every second, which allows you to receive a solid income.

An indispensable requirement for successful dealing is high efficiency in two areas: in obtaining up-to-date information on the movement of exchange rates and in carrying out transactions on the market. Delay even for a split second can sometimes lead to considerable financial losses.

Speculation in the foreign exchange market is today one of the main sources of income for modern banks around the world. For example, 80% of the total profit of the largest Swiss bank (United Bank of Switzerland (UBS) in 1994 was made up of speculation in the currencies US$/DM, US$/Yen, and only 20% of the total profit came from income from loans and securities trading etc. (see the financial report "UBS Annual Report of 1994." Income from currency speculation is in the first place for such banks as: Chase Manhattan Bank, Barclays Bank, Soceite Generale Bank & Trust, Swiss Bank Coporation, ABN-Amrobank, Greditanstalt Bankverein and others.

• 5. Currency options. A currency option is a transaction between the buyer of the option and the seller of currencies, which gives the buyer of the option the right to buy or sell at a certain rate an amount of currency within a specified time for a fee paid to the seller. Currency options are used if the buyer of the option seeks to insure himself against losses associated with changes in the exchange rate in a certain direction.
• 6. Forward transactions. Let’s assume that an importer from Ukraine in 1 month on June 15, 2000 needs $1,000,000 to pay for products that will be supplied from an American exporter. Since the importer is afraid of an increase in the dollar exchange rate, he decides to insure himself by concluding a forward contract with CB. The bank quotes the dollar to Ukrainian hryvnia exchange rate for a forward transaction with a maturity of 1 month. By selling on a forward basis, the bank will incur debt and, as a result, the bank will have a short position in dollars. There will be risk associated with the open position. The bank wants to insure this risk. Insurance occurs through two options: through a combination of interest and foreign exchange transactions or a forward transaction on the interbank foreign exchange market. Since the forward rate is influenced by interest rates, in order to calculate the forward rate the bank will be guided by the first insurance option, namely a combination of interest and foreign exchange transactions:

Spot rate as of 05/15/2000 UAH/USD _ 5.4412 5.5062

Interest rate for 1 month:

In dollars - 6%; in hryvnia - 48%

The bank takes out a loan in hryvnias equal to UAH 5,506,200. at the spot rate, at 48% per annum for 1 month for the purchase of $1,000,000.

Loan interest = 5,506,200*0.48*30/360 = 220,248 UAH for 1 month

When repaying the loan, the bank needs to pay UAH 5,726,448.

Next, the bank buys dollars to close the foreign exchange position. Since the bank does not need dollars for 1 month (when they are delivered to the importer), it will place them on the interbank foreign exchange market for a one-month period at 6% per annum and receive interest:

Interest on deposit = 1,000,000*0.06*30/360 = $5,000 for 1 month. That is, after 1 month the bank pays 5,726,448 UAH. and receives $1,005,000.

In practice, the bank will apply the following formula (3.3):

The bank sets the forward rate at 5.699 UAH per 1 USD, which, taking into account the risk and profit, slightly exceeds the calculated value.

Then the bank chooses one of the options for covering currency risk: either a combination of interest rate and currency transactions, or concluding a transaction at a lower forward rate. The bank decides to compensate the client’s transaction on the interbank foreign exchange market by concluding a forward transaction, playing on the difference in rates.

On the interbank foreign exchange market, the forward rate of UAH/USD was 5.6860. By concluding an interbank transaction, the bank will receive a profit from insurance.

So, when carrying out these operations, the bank receives a profit equal to 5,697,900 - 5,686,000 = 11,900 UAH.

7. Swap transactions. Swap transactions are also carried out using forward contracts. Swaps allow, just like forward agreements, to insure currency risks, that is, to reduce possible losses as a result of unfavorable changes in the economic environment, and, secondly, to receive additional income by taking on interest rate risk commensurate with the expected profit.

Currency swap is a combination of two conversion transactions with currencies on spot and forward terms. Foreign currency purchased under a spot transaction is sold after a certain period, and, accordingly, the currency sold under a spot transaction is purchased again at a later date. One conversion involves immediate delivery (spot transaction), and the other, the reverse, involves delivery in the future under pre-agreed conditions (forward transaction). Both transactions are concluded with the same partner, with rates, value dates and payment methods set at the time the transaction is concluded. The exchange rates at which currencies are exchanged may change if both parties believe that the values ​​of the currencies will change over time. There is no significant credit risk in this transaction, since the default of the currency swap means that the intended currency exchange will not take place in the future. A swap helps reduce long-term operational risk. However, in the event that one party is unable to fulfill the contractual obligation, the other company will have to exchange the currency on the foreign exchange markets at the new exchange rate. Currency position _ ratio of obligations by currency codes and terms. A closed position is possible - when the obligations for each currency coincide in terms and amounts. If this condition is not met, the position is considered open. An open position in the ratio of each currency code can be short or long. A long position implies a predominance of claims in currency compared to liabilities. A short position implies a predominance of obligations in a currency in relation to claims on it. Swap transactions allow you to manage interest rate and currency risk in conditions of instability of exchange rates and interest rates.

8. Futures transactions. A currency futures is a contract for the future exchange of a certain amount of one currency for another at a predetermined rate. Futures exchanges around the world typically use direct exchange rate quotes, which indicate the amount of domestic currency required to purchase a unit of foreign currency. In currency futures listed on U.S. exchanges, futures prices reflect the dollar value of a unit of the underlying currency. The purchase price of a currency futures contract is determined primarily by the forward rate of the underlying currency.

The vast majority of currency futures are traded before the delivery date, i.e. buy trades are replaced by sell trades of an equal amount and vice versa, thus closing open positions and avoiding physical delivery of the currency. When trading currency futures, it is important to anticipate changes in the rate of the base currency in the future and constantly monitor changes in the rate throughout the entire validity period of the futures, and if you catch an undesirable trend, get rid of the contract in a timely manner. Speculators close positions when they either make a profit or decide to cut their losses.

9. Margin trading. The purchase/sale of currencies between participants in the foreign exchange market is carried out, as a rule, in fixed volumes (lots).

The size of the minimum trading lot is 100,000 units of the first quotation currency; for simplicity, we will talk about US dollars. Banks and financial companies operate with volumes of several million and sometimes several hundred million dollars.

If you operate on the market with a real hundred thousand, then in reality the profitability from speculative operations will be, at best, 30 - 40% per annum, which, generally speaking, is also very good.

At the same time, there is a mechanism for margin trading, which allows you to increase profitability to 5 - 20% per month, depending, as already mentioned, on the conditions and qualifications of the trader.

The essence of margin trading is that banks and brokerage houses that provide services for clients to carry out conversion transactions carry them out when there are funds in the client’s account that are significantly less than the required volume of the market lot. In order to operate with a volume of funds of $100,000, it is enough to have $10,000 on your trading account. The brokerage house will thus carry out transactions at the client’s direction for an amount 10 times greater than the money in his account. This is the principle of margin trading or leverage trading. In this case, "leverage" - the ratio between the transaction volume and the client's own funds - is equal to 10. Typically in practice its size ranges from 20 to 100, depending on specific market conditions. In this case, the profitability of these operations will accordingly increase.

10. Risk hedging. Exporter risk hedging. The exporter enters into a forward contract with his bank for the sale of dollars for a period of 1 month, counting on an increase in the exchange rate against the dollar. The exporter buys futures contracts on the currency exchange for the supply of dollars for a period of 1 month for the amount of the commodity contract.

Hedging the risk of the exporter's bank. The exporter's bank, which has entered into a contract with its client to purchase dollars at a forward rate with deferred execution, simultaneously buys futures on the exchange for the supply of dollars with the same expiration date.

Hedging the importer's risk. An importer expecting an increase in the exchange rate is in an advantageous position, since in this case he will need fewer dollars to pay for the contract. But the dynamics of the exchange rate may be different. To insure yourself against rising dollar rates:

The importer buys futures contracts on the foreign exchange exchange for the transaction amount. Enters into a forward contract with his bank to purchase currency with a deferred execution.

Hedging the risk of the importing bank. The importer's bank takes risks when entering into a forward contract with its client. In the event of an increase in the dollar exchange rate against the mark. The following actions are possible on his part: simultaneously with the conclusion of a forward sale transaction, the bank buys futures on the currency exchange for the purchase of currency in the amount of the forward contract with the same execution date as the execution date of the forward transaction.

Thus, theoretically, all participants in the transaction have the opportunity to insure their currency risks and even receive additional profit if the exchange rate dynamics are favorable for them. In conditions of floating exchange rates, futures quotations of currencies are subject to significant and often unpredictable changes, which makes the task of correctly forecasting the exchange rate difficult to solve in principle.

Foreign exchange transactions are operations related to the export and import of goods, works, services, settlements for which are carried out both in foreign currency and in national currencies, as well as the purchase and sale of foreign currencies.

An exchange rate is the rate at which the currency of one country can be sold in exchange for the currency of another country.

There are 2 ways to buy and sell foreign currency:

1) spot, i.e. immediate delivery;

2) forward, i.e. delivery associated with a specific date in the future.

Spot foreign exchange transactions account for about 90% of all foreign exchange transactions.

The state sells foreign currency to purchase national currency when it seeks to prevent the depreciation of its currency. And, conversely, to curb the exchange rate of the national currency, the state buys foreign currency, replenishing official reserves.

There are two methods of quoting foreign currency against national currency - direct and reverse. Most countries use direct quotation, in which the value of a unit of foreign currency is expressed in national currency. At indirect quotation The unit is the national monetary unit, the exchange rate of which is expressed in a certain amount of foreign currency. In transactions on the interbank foreign exchange market, quotes are made primarily against the US dollar, since it is an international means of payment and reserve.

In the process of making transactions with currencies, the bank receives one currency for another. At the same time, the ratio of the bank's claims and obligations in foreign currency determines its currency position. If the requirements and obligations coincide, then the currency position is considered closed; if they do not match, it is considered open. An open currency position can be of two types: short and long. A position in which the obligations for the currency sold exceed the requirements is called short, but if the requirements exceed the obligations, it is called long.

The analysis of foreign exchange transactions of a commercial bank is carried out in the following sequence:

Stage 1. An analysis of the composition and structure of the volumes of foreign exchange transactions is carried out:

English pound sterling;

Japanese yen;

U.S. dollar;

Russian ruble.

Stage 2. An analysis of the exchange rates of the Belarusian ruble and the currencies included in the currency basket is carried out:

U.S. dollar;

Russian ruble.

The data is entered into a table, changes are found and conclusions are drawn.

Stage 3. An analysis of relative indicators characterizing the nature of the bank’s foreign exchange operations is carried out:

The share of a specific currency in the total volume of foreign exchange transactions;

Discount (premium) at the forward exchange rate, which is determined by the following formula:

Where: SPDa- interest rate on deposits in currency A (A is the quoting currency);

SPDc- interest rate on deposits in currency C (C is the quoted currency);

KS- spot rate;

PKF– approximate forward rate, calculated by the formula:

Where: HF– credit investments;

SF – the transaction term is forward.

The share of foreign exchange transactions in the total volume of banking transactions;

Profitability of foreign exchange transactions.

Stage 4. A factor analysis of the change in discount is carried out using the following factor model:

Stage 5. Reserves for the growth of foreign exchange transactions are being calculated and proposals are being developed to improve the bank's foreign exchange activities.

Analysis of the profitability of foreign exchange transactions of OJSC Alfa-Bank

Bank income is the amount of money received from the results of active operations. In accordance with the developed accounting policy, the bank's income includes income directly related to banking activities and not related to the main activities of the bank, but providing for general banking activities. All income items can be divided into interest income and non-interest income, depending on the type of income transaction. When accounting for interest and commission income in bank institutions, the accrual principle is used. All transactions performed are recorded when they took place, regardless of the time of receipt or payment of funds. Revenues are considered earned in the period in which the related transaction occurs, and not when the funds are actually received. Interest income is accrued on balances on correspondent accounts opened with other banks, as well as on deposit accounts and on transactions with securities. The amount of interest rates, the procedure for calculating interest, the procedure for their payment are determined in agreements between the bank and the client. Revenues from the last day are in some cases taken into account in the following month, when the reporting date is the end date of the transaction. This situation also arises when it is impossible to determine the amount of income due to the lack of necessary data to determine it, despite the fact that the service was provided in the previous month. Interest is calculated using the “fact/fact” method (the actual number of calendar days in a month and year is taken into account).

A quantitative analysis of Alfa-Bank's income structure is considered in determining the share of income items in the total amount. A comparative analysis of both total income and each of their items is carried out for the corresponding time period. The analysis of the structure is based on the percentage values ​​of each to the total amount. Changes in percentage indicators indicate changes in the share of articles in the overall indicators.

In 2004, income from foreign exchange transactions amounted to $18.2 million, which accounted for 13.7% of total income; in 2005, income from foreign exchange transactions increased by $3.8 million and amounted to $22 million. , which amounted to 14.6% of total income.

All income items can be divided into interest income and non-interest income, depending on the type of income transaction. This is clearly depicted in Table 1.

Table 1.

Structure of income and profitability from foreign exchange transactions for the analyzed period

interest	Total amount, dollars	Share in income, %
1. Interest on balances on NOSTRO accounts
2. Interest on interbank loans of non-resident banks in rubles
3. Interest on interbank loans in hard currency
4. Income from conversion operations
5. Commission from funds transfers on behalf of clients
6. Income from permits to export currency
7. Income from the sale of foreign currency for travel expenses
8. Income from the sale of traveler's checks
9. Income from the sale of currency
non-interest
1. Income for issuing customs certificates
2. Income for issuing certificates to clients
3. Commission for bank transfers, requests, clarifications
4. Income for issuing certificates of declaration of currency values
5. Income from a currency exchange office under agency agreements
Income - total

We present the sources of income in the form of Table 2 and Fig. 4.

Figure 4.

Table 2.

Alfa-Bank's sources of income and their structure

Interest income includes income that is calculated in proportion to time and amount and is compensation to the bank for the credit risk taken. These include:

• 1. Income from loans and deposits and other interest-bearing financial instruments, including fixed income securities;
• 2. Income in the form of amortization discount (premium) on securities;
• 3. Commission fees, for example, income from placing funds in the form of a loan or an obligation to issue it, which is determined in proportion to the time and amount of the obligation, income from leasing transactions.

Methods for transferring interest payments are determined in the loan agreement.

Interest income takes up the largest share in the income structure. In 2004, interest income from foreign exchange transactions amounted to 15.5% of the bank’s total income, in 2005 - 16.2%, which is an increase of 0.7 points compared to 2004.

Let's look at the sources and structure of interest income in Tables 3 and 4.

Table 3.

Sources of interest income

Table 4.

Interest income distribution structure

The share of indicators in Table 4 makes it possible to assess through what foreign exchange transactions such a volume of interest income was achieved. After conducting such an analysis, we will determine the factors that influenced the amount of interest income from foreign exchange transactions.

The main source of income is the bank's lending activities. Lending activity is influenced by the current situation in the economy: inflationary processes, various restrictions from the Bank of Moscow, as well as factors such as:

• 1. An increase in the share of loan assets in total assets that generate income in the form of interest;
• 2. Change in loan assets compared to last year.

As data from the analyzed bank show, during 2004-2005 the growth rate of loan volumes increased from 0.95 to 1.26, i.e. reached a positive level for bank characteristics of more than 1. The interest rate level has a significant impact on lending profitability, as can be seen from Table 5.

Table 5.

General assessment of plan implementation in terms of interest income

From the above data it is clear that the share of income from lending in 2005 decreased compared to 2004 by 10.78 percentage points.

Let's consider two factors (the amount of loans issued and the interest rate on the loan issued) that influenced the amount of interest income.

We present an analysis of the structure of resources and investments in foreign currency in Table 6.

Table 6. Structure of resources and investments in foreign currency

An analysis of the structure of resources and investments in foreign currency shows that during this period, a positive decrease in non-income-generating assets was 6.02 percentage points, i.e. It has become more profitable to place available funds. However, there is an increase in expensive resources by 14.01 percentage points and a decrease in free resources by 4.3 percentage points, which is explained by a decrease in own currency and the placement of more expensive funds of borrowers.

As for interest income from interest received on correspondent accounts, their share in the total income for 2004 is 2.87%, for 2005 -1.74%, the decrease is explained by a decrease in the average interest rate on the world currency market.

In conditions of inflation and fierce competition, the growth of income due to interest decreases. The extent to which Alfa-Bank actively uses other sources of income is shown by an analysis of the structure of non-interest income.

The Bank is constantly expanding the range of paid services and non-traditional operations that increase the total income received.

The main channels for the receipt of non-interest income are: non-trading transactions, cash settlement operations, and other non-interest transactions. If we consider the structure of non-interest income as of 01/01/2006, the largest share is made up of cash settlement transactions - 65.9%, then non-trading transactions - 29.5%, others - 4.6%. Data on non-interest income for 2005 are summarized in Table 7.

Table 7.

Structure of non-interest income

The bank's expenses on foreign exchange transactions are classified as follows:

• - interest paid;
• - exchange rate differences in foreign currencies;
• - other expenses.

Expense items will be divided into interest and non-interest expenses depending on the type of expense transaction.

Let us carry out an analysis with appropriate detail for each of the main expense items considered, presenting the data obtained in the form of tables 8, 9 and figures 8, 9.

Table 8.

Expenses from foreign exchange transactions for the analyzed period

Table 9.

Sources of expenses and their structure

Interest expenses make up the bulk of foreign exchange expenses, so a detailed analysis of them is of great importance. Based on five periods, we calculate the average costs of foreign exchange transactions and present them in the form of Table 10 and Figure 10.

Table 10.

Average costs from foreign exchange transactions in the overall structure of interest expenses

The data presented confirm that interest expenses play a predominant role in the total amount of Alfa-Bank's expenses on foreign exchange transactions and, therefore, it is necessary to conduct a more detailed analysis of them to identify the reasons that influenced their size.

When analyzing non-interest expenses, you should consider their structure and determine the place of each group of expenses in their total amount. The main part of non-interest expenses consists of settlement transactions - 67.33% of the total amount of non-interest expenses, then non-trading transactions -31.44%, other -1.24%. The distribution structure of average non-interest expenses over five periods is shown in Table 11 and Figure 11 .

Table 11.

Average costs from foreign exchange transactions in the overall structure of non-interest expenses

An analysis of non-interest expenses shows that the bank should rationally reduce other cost items, avoiding unjustified expenses, such as fines and penalties paid for banking operations.

An analysis of non-interest expenses shows that the bank should rationally reduce other cost items, preventing unjustified expenses, such as fines and penalties paid for banking operations.

1.3 ANALYSIS OF PROFITABILITY OF CURRENCY OPERATIONS

The concept of profitability of a commercial bank reflects the positive overall result of the bank’s activities in all spectrums of its economic and commercial activities. The bank's income covers all its operating expenses, including administrative and managerial ones, generates profit, own funds, the level of possible dividends, and develops active and passive operations.

Bank profitability is characterized not only by the monetary expression of the excess of income received over expenses. It is necessary to identify the size of the sources of specific types of income, their share in the total volume of assets and liabilities, compare one’s own financial results with the average profitability in the corresponding sector of the financial market, as well as with the average results of other credit institutions.

Although there are certain elements of planning for banking activities, universal standards for planning the profitability of a commercial bank are difficult to establish. A number of factors introduce a significant element of uncertainty, especially in Ukraine with its developing economy. The banking system as a whole is regulated by macroeconomic factors of monetary policy determined by the NBU. Only such an important indicator as the refinancing rate, which largely determines the cost of placing and attracting funds from commercial banks, has changed several times a year over the past five years. The rates of contributions to the mandatory reserve fund were revised several times a year. Yields in the government short-term market are also highly susceptible to money market conditions.

In addition, profitability depends on the strategic, tactical, private tasks solved by a particular bank, the specialization and qualifications of banking divisions, the Figures that the bank is ready to take on, as well as the actions of competing credit institutions.

In financial management, the concept of “Figure-income” interaction is used, according to which an increase in profitability, and therefore profit, is accompanied by an increase in bank Figures. This concept defines the profitability trend as a directly proportional value to the “Design” of the bank’s portfolio and operations. Thus, profitability is viewed as a compromise rather than a rigid parameter. The main task of banking management is profitability management, taking into account the minimization of Figures. For example, US commercial banks adhere to the concept of “high-profit banking”, consisting of 3 components:

Maximizing income by maintaining a fairly flexible asset structure, adjusted to changes in interest rates;

Minimizing costs by maintaining an optimal structure of liabilities;

Competent management, covering the implementation of the first two components.

Thus, at the initial stage, based on expected macroeconomic trends, the level of profitability of various financial transactions is predicted. An important guarantee of bank profitability is the rationalization of the structure of income and expenses, as well as maintaining an optimal balance sheet structure in terms of assets and liabilities. At the same time, a necessary condition for ensuring the profitability of banking activities is, of course, maintaining liquidity, managing bank figures and minimizing them. Based on these indicators, a conclusion is made about the reliability of the bank as a whole.

Let's consider profitability analysis based on the principle of mirroring.

For a general assessment of the bank's activities for the analyzed period, a comparison of income and expenses is made. Such a comparison allows us to identify which operations are profitable, which are unprofitable, and whether losses from some operations are covered by profits from others.

The presence of “mirror” items in the income and expense items of the “Profit and Loss Statement” allows you to correlate them with each other and draw conclusions about the effectiveness of using a particular financial instrument in various sectors (credit, stock, foreign exchange, etc.). Using the difference in mirror items, correlated with net income as a whole or separately with the amount of income (expenses), allows us to identify the share and degree of influence of each source of income in the total amount of income.

The resulting positive indicator values ​​in the presence of total net income reflect income for this financial instrument, and in the presence of total net loss - loss. Negative coefficients, accordingly, change the picture the other way around: profit on a given financial instrument in the presence of a total net loss or a loss in the presence of a total total net profit. If the structure of the bank’s income and expenses is recognized as unfavorable, the bank must adjust its policy in the relevant sectors (credit, foreign exchange, stock, etc.).

Bank profit is important for all participants in the economic process. Shareholders are interested in profit because it represents the return on invested capital. Profit brings benefits to depositors, as increased reserves and improved service quality create a stronger, more reliable and more efficient banking system. Profit is an indicator of the bank’s performance. Its analysis should begin with a consideration of its constituent components. In general terms, the profit remaining at the disposal of the bank depends on three global components: income, expenses and taxes paid to the budget.

Analysis of income and expenses reveals the reasons for their changes. Let's compare the data obtained from the analysis of income and expenses and:

Let's calculate the percentage profit;

Let us determine the degree to which non-interest expenses are covered by non-interest income;

Let us determine the profit received from foreign exchange transactions for 2000;

Let's calculate the efficiency of foreign exchange transactions.

Interest income is obtained by subtracting interest expenses from interest income. For ease of comparison, the growth rates of interest income, expenses and profits from foreign exchange transactions for the analyzed period are shown in Figure 1.15.

Let us determine the degree to which non-interest expenses are covered by non-interest income, i.e. Let's determine non-interest profit (loss) for the analyzed period (Figure 1.16). In American practice, the level of non-interest income is at least 50% of non-interest expenses.