- To hedge the Foreign Exchange Risk
- To minimize the unexpected losses due to exchange rate fluctuations
FX Forward contract is an arrangement between bank and customer on execution of Foreign exchange transaction with future value date, at pre-agreed exchange rate and amount. Execution of FX forward transaction is obligatory.
Who may use FX forward?
Companies, which have loans in foreign currency and revenues in home currency (GEL):
- Are keen to insure principal and interest amount in foreign currency against foreign exchange risk.
Importer and Exporter companies, which:
- Are keen to insure money payable and/or receivable in foreign currency against currency risks.
e.g: Georgian company imports goods from Europe and has expected future payments in EUR, although proceeds from sales are received in GEL. Goods will be sold during the following 2 months and received cash in GEL has to be converted to EUR so as to make the following payments in EUR
Company decides to hedge its EUR exposure and enters the FX forward contract on EUR/GEL currency pair, for the time period of 2 months.
- Transaction amount - 500,000
- Current exchange rate: 1 EUR = 3.25 GEL
- Forward margin - 10% annual
- Forward period - 2 months
- Forward rate: 1 EUR = 3.2676 USD, calculating method: (3.25+3.25*10%/12*2)
FX FORWARD RATES
|USD US Dollar|
NON-DELIVERABLE FORWARD (NDF)
- Companies, who want to mitigate exchange rate risk, although may not actually require to execute the exchange transaction
- Companies, who have obligations linked to future exchange rate
|Contract Period||Up to 1 year|
|Currency Pairs*||Contract can be done in all major currencies|
|Minimum amount of transaction||50,000 USD or equivalent|
|Reservation amount||10% of the total value of transaction should be reserved on customer account, which will be adjusted at final settlement of the deal|
|Service fee||Service fee is considered in a foreign exchange forward rate|
|Arrangement||Directly with TBC Bank Treasury|
*Non-Deliverable Forward Contract can be done only for USD/GEL currency pair.
TBC Bank Treasury
Tel: +322 2 27 27 28
+332 2 27 27 25
+332 2 27 27 27 (*1108, *1105,*1173)
Dealing Code: TBCG