Foreign Exchange Operations Research Articles

РАЗВИТИЕ ВАЛЮТНОГО РЕГУЛИРОВАНИЯ ЭКСПОРТНЫХ ОПЕРАЦИЙ В РФ

Export operations are of particular relevance because they are carried out under conditions of uncertainty and high risk. The sanctions economy is caused by a number of factors that have a direct impact on export-oriented enterprises, leading to a number of consequences. Today, export operations are the sector that is regulated by the state in order to develop stable infrastructural links between exporters' organisations and to reduce the sanctions impact on exporters' enterprises. The main task is to provide conditions for the development of export operations, building international cooperation of exporters' organisations, and on the other hand to carry out control functions, as well as to build transparency of information support, to ensure the reliability of foreign exchange operations in terms of export relations. The state has developed a number of measures to reduce risks, one of which is the system of currency regulation and control. Therefore, this topic is topical. The article presents a review of normative acts and highlights the main directions of regulation of export operations on the territory of the Russian Federation. The modern problems of exporters are formulated, the principles of currency regulation of currency control in terms of export operations in modern conditions through digital mechanisms are disclosed

Financial and legal status of the european central bank in the institutional structure of the european banking system

The paper deals with the problem of determining the financial and legal status of the European Central Bank (hereinafter referred to as the ECB), analyzing scientific approaches to the essence of the concept of "financial and legal status of the central bank", as well as the constituent elements that determine this status. Particular attention is paid to the correlation between the financial and legal status of the ECB and the National Bank of Ukraine (hereinafter - the NBU), namely: in powers, independence, profit sharing, and functions. The European Central Bank is an organization with a special status. Only the ECB has the exclusive right to authorize the issuance of banknotes on the territory of the community. It should be especially emphasized that banknotes issued by the ECB and national central banks are the only banknotes that have the status of legal tender in the EU. Also, its importance is emphasized by the fact that each of the member states had to ensure, at the latest - before the date of creation of the ESCB, compliance with the Treaty on the European Community and the Statute of the ESCB and the ECB, including the Regulation on the national central bank. The European Central Bank is an organization with a special status. Only the ECB has the exclusive right to authorize the issuance of banknotes on the territory of the community. It should be especially emphasized that banknotes issued by the ECB and national central banks are the only banknotes that have the status of legal tender in the EU. The financial and legal status of central banks is based on the general legal status, therefore, first of all, the general provisions on the legal nature of central banks contained in the laws on these banks are analyzed. The financial and legal status of the ECB in the institutional structure of European banking is defined in the financial and legal functions and powers, namely: in the implementation of foreign exchange operations, management and maintenance of foreign exchange reserves and ensuring the smooth functioning of the payment system, support the general economic policy of the union, and also contribute to the implementation of measures to strengthen the stability of the financial system.

Foreign Exchange Operations of Islami Bank Bangladesh Limited

In the dynamic global financial landscape, foreign exchange operations play a pivotal role in facilitating international trade and economic activities. Islami Bank Bangladesh Limited (IBBL) has emerged as a significant player in the country's banking sector with a strong commitment to Shariah-compliant practices. Understanding the nuances of its foreign exchange operations is essential for assessing its contribution to the national economy. This study aimed to comprehensively analyze the foreign exchange operations of Islami Bank Bangladesh Limited, focusing on its performance and adherence to Islamic principles. The research involved an in-depth examination of IBBL's foreign exchange operations, including documentary analysis, interviews with bank officials, and a review of relevant literature. Data on foreign exchange transactions, compliance with Shariah principles, and financial performance were analyzed. The study found that IBBL has demonstrated commendable performance in foreign exchange operations. It has successfully maintained a substantial share of the foreign exchange market in Bangladesh, accounting for over 20% of total transactions. Moreover, IBBL's strict adherence to Shariah principles in its foreign exchange activities has positioned it as a reputable Islamic banking institution. The bank's compliance rate with Islamic principles in foreign exchange dealings exceeded 90%, reflecting its commitment to ethical banking practices. Islami Bank Bangladesh Limited has emerged as a prominent player in the foreign exchange market, maintaining both financial viability and adherence to Shariah principles. Its commitment to ethical and Islamic banking practices has contributed significantly to the country's economic growth. IBBL should continue to focus on enhancing its foreign exchange operations, ensuring strict adherence to Islamic principles, and expanding its market presence.

Regulation of foreign exchange operations of commercial banks in financing construction projects

Regulation of foreign exchange operations of commercial banks in financing construction projects

ЕФЕКТИВНІСТЬ ДІЯЛЬНОСТІ НЕОБАНКІВ В КОНТЕКСТІ ЇХ ПРИБУТКОВОСТІ

The article addresses the development of neobanks as a new business model in the banking industry, posing as a competitor to traditional banking models. The research aims to define the theoretical foundations of neobank functioning and identify sources for enhancing neobanks' profitability. The article analyses existing interpretations of the term "neobank" and proposes its formulation. If during the launch period and the first 3-4 years, the primary focus is directed towards scaling the operations of Neobank and establishing a substantial client base, then upon achieving these objectives, the emphasis shifts towards the necessity of profit generation. Indeed, achieving profitability constitutes a challenging endeavour for most neobanks in the current stage. The article highlights and characterises the business models of neobanks in the context of their primary revenue sources: interchange fees, income from paid subscriptions, revenue from credit activities, earnings from international transfers, and revenue from providing Banking-as-a-Service. The efficiency of operations of five European neobanks has been analysed based on their statistical reports, focusing on the dynamics of losses and profits. It was found that several large neobanks did not reach profitability by the beginning of 2022, and possible reasons for this phenomenon were identified. The primary revenue sources of the European bank Revolut have been analyzed, using it as a case study. These revenue sources include subscription revenue, payment, and commission revenue, foreign exchange, and capital operation revenue. Additionally, their structural proportions have been examined. The structural composition of various revenue sources reflects the bank's current strategy. It can serve as a basis for modifying and optimizing services to achieve competitive advantages. Using the example of the neobank Revolut, it was found that rapid growth in revenue from foreign exchange and capital operations, along with moderate growth in other categories, contributed to a shift in the revenue structure and facilitated the attainment of profitability for the neobank. The article suggests vectors for future neobank development to increase revenue and achieve profitability.

ACCOUNTING PRESENTATION OF THE EFFECTS OF THE FLUCTUATION OF EXCHANGE RATES IN INTERNATIONAL COMMERCIAL BUSINESS

The problems related to the accounting presentation of the effects of the fluctuation of exchange rates are of extreme importance for enterprises specialized in conducting international commercial business. These effects have a significant impact on the financial results of the realized international activities and on key indicators for business analysis, among which profitability, efficiency based on costs, efficiency based on revenues, etc. This determines the need to provide sufficiently detailed accounting information to analyze the effects of changes in exchange rates when conducting international commercial transactions and the influence of the exchange rate differences on the financial results of these transactions.In the study of the issues in the article the normative and systemic approaches are applied. The legal requirements currently in force in the Republic of Bulgaria regarding the accounting of cash, receivables and liabilities in foreign currency, the recognition and reflection of exchange rate differences in the implementation of international commercial transactions are discussed.The possibilities for making improvements in the processes of creating and using accounting information for the effects of the fluctuation of exchange rates in the international commercial business of Bulgarian enterprises are investigated. Guidelines for improving the organization of the system for synthetic and analytical accounting of the costs and revenues of foreign exchange operations and their influence on the financial results of the international commercial transactions realized by the enterprises are proposed. An approach to applying alternative combinations of exchange rates is presented, which can be used for management purposes in comparing actual international commercial transactions with those previously planned.The proposed approaches for providing detailed accounting information for the effects of the fluctuation of exchange rates can be applied in the practice of enterprises developing international commercial business. The practical applicability of these approaches is shown on the basis of factual numerical data for a real international commercial transaction.The conducted research gives reason to summarize that an effectively organized system for synthetic and analytical accounting of the effects of the fluctuation of exchange rates is of key importance as an information source in the decision-making processes in the management of the international commercial business of Bulgarian enterprises in the conditions of the modern global economic environment.

КРЕДИТНИЙ РИЗИК У СУЧАСНИХ УМОВАХ

The article carried out scientific research and investigated the problem of the correct interpretation of the concept of "credit risk". The norms of the current legislation of Ukraine regarding the definition of the concept of "credit risk (CR)", which is regulated as the amount of expected losses or damages (EL) for an asset as a result of the debtor’s (counterparty’s) default, have been analyzed. The concepts of "default" and "credit loss" are considered, the National Bank of Ukraine’s assessment of the credit portfolio due to the war is disclosed, the losses of which are estimated at the level of 30%, which poses a great threat to the banking sector. Changes to a number of regulatory documents regarding prudential credit risk assessment approaches have been analyzed: banks’ opportunities to apply simplified credit risk assessment procedures have been expanded; established temporary features of credit risk assessment to support banks in providing flexible conditions, socalled credit holidays, to borrowers in a period of uncertainty; an amendment was made to the Instruction on the Procedure for Regulating the Activities of Banks in Ukraine, which reduced the risk weight (RWA) from 150% to 100% for consumer unsecured loans. The restrictions on foreign currency exchange operations related to non-resident banks on the so-called "stop" conditions for the first group of the Foreign Currency Classifier to support the liquidity of banks have been substantiated. Innovations of the International Financial Reporting Standard IFRS (IFRS) were studied, which in the legal and economic context of the essence of credit risks provides for the concept of expected credit losses (which will always be greater than zero), which should reflect probable losses due to the ownership of financial assets. The means of reducing credit risks were analyzed, in particular, diversification: geographical and portfolio. Considering the specifics of credit risks, the specifics of credit transactions are substantiated. The criteria for assessing credit risks based on qualitative and quantitative analysis are revealed. It was concluded that the actual assessment of credit risks in financial terms is under the influence of credit risk on the financial results of business entities and banking institutions and the specifics of credit operations.

Upravljanje rizikom u deviznom poslovanju privrednih subjekata

Risk is an integral part of everyday business. Doing business outside the borders of the national economy implies settlements and payments in different currencies and carries with it the occurrence of risks of changes in exchange rates, interest rates on the international market and the like. Globalization has led to the fact that economic entities are necessarily directed to do business with foreign economic entities, either in the role of buyer or in the role of seller. In both cases, payment is implied, but also settlement in domestic and foreign currency, since in the Republic of Serbia the official currency is the dinar, and most foreign exchange operations are performed in euros and dollars. The problem can arise on several grounds, due to the mismatch between the realization of business and payments, due to the overestimation or underestimation of the domestic currency in relation to the foreign currency, but also due to numerous other reasons. Having in mind the above, the aim of this paper is to point out the need for risk management in foreign exchange operations of economic entities, which significantly affects the stability of the financial and overall economic system of a particular national economy.

Unconventional central banking and the politics of liquidity

The 2008 financial crisis saw central banks introduce a variety of tools to shore up the financial system, including unconventional measures that made use of central bank balance sheets to directly shape markets. This paper argues that central banks increasingly rely on unconventional tools in noncrisis times to maintain confidence in an unstable financial system: in rich countries, outright asset purchase programs form the core of monetary policy, and in emerging capitalist economies, the sale and purchase of foreign exchange assets constitute the central mechanism of exchange rate policy. These interventions increasingly target ‘market dysfunction,’ as opposed to (a narrow interpretation of) monetary policy or the level of the exchange rate, suggesting a convergence in central bank operations around maintaining the plumbing of finance. Using two case studies – foreign exchange operations by the Reserve Bank of India and asset purchase programs by the U.S. Federal Reserve – the paper demonstrates a blurring of the boundaries between crisis and noncrisis interventions, and lends evidence to the concept of a de-risking state that guarantees liquidity. The paper concludes with a discussion of how a de-risking state exacerbates inequality, financial vulnerabilities and undermines meaningful action on pressing issues such as climate change.

Important Aspects Related To Foreign Exchange Operations Of Commercial Banks

This article provides analytical, critical and econometric analysis of the factors influencing the off-balance sheet operations of commercial banks of the Republic of Uzbekistan. Factors influencing documentary letters of credit, currency forward transactions, bank guarantee-related transactions, currency spot, currency futures and options from off-balance sheet operations, which are highly profitable for commercial banks, were studied.

Accounting for foreign exchange operations and its implications for monetary policy implementation: international experience and the case of Brazil

Central banks play a unique role in the payment systems and in the issuance of their currencies. Therefore, they cannot become illiquid. However, persistent losses can undermine their credibility. The law 11,803 diminished the possibility of negative results at the Brazilian Central Bank (BCB) by isolating and transferring its foreign exchange results to the Treasury. It also created an asymmetrical distribution scheme that automatically supplies the BCB with the necessary bonds to execute its liquidity management operations and assured the accounting hedge of the foreign exchange swaps, enhancing its autonomy. The main drawbacks of this legislation are the lack of transparency and the increased frequency of transfers between the BCB and the Treasury. However, the expansion of the reverse repos is tied to the accumulation of international reserves and to the interest rate differential between foreign assets and local liabilities and would have happened regardless of the monetary policy instrument.

Demand Effects in the FX Forward Market: Micro Evidence from Banks’ Dollar Hedging

AbstractUsing contract-level supervisory data, we show that dollar forward sales by non-U.S. banks that are initiated at the end of a quarter and mature shortly after it concludes trade at higher prices and higher volumes. These effects are driven by banks with large net on-balance-sheet dollar assets that they can hedge around quarter ends by selling dollars forward (increasing off-balance-sheet short positions), which suggests regulatory arbitrage to reduce capital charges for open foreign exchange (FX) exposure. Our results indicate that demand effects related to banks’ management of FX exposure are an important driver of deviations from covered interest rate parity.

A new multivariate approach for assessing corporate financial risk using balance sheets

Several indicators and univariate ratios can be used to measure the soundness of firms as reflected in their balance sheets (leverage, profitability, liquidity ratio, etc.). However, each indicator alone cannot measure a firm's overall financial risk or financial distress level. In this study, we measure the financial strength of the real sector firms listed on the Borsa Istanbul (BIST) by producing a composite index score that combines several different corporate finance ratios. In the first section, we conduct a multiple discriminant analysis of the variables used in Altman's z-score (1968), which is the most prevalent composite index used to measure firms' financial risk in the literature. In the second section, we introduce a new index, called the multivariate firm assessment (MFA) score, which uses the ratios that best explain the characteristics of companies listed on the BIST. The Tailored version of the Altman z-score and our new index have predictive power of around 90 percent. Furthermore, the MFA score reflects the impact of macroeconomic developments on firms' balance sheets and thus serves as an early warning of financial distress for Turkish firms. Our analyses using the MFA score suggest that non-exporting firms and firms with an open foreign exchange position have weaker balance sheets.

70 years of China's foreign exchange market development: history and experience

PurposeThe development of China's foreign exchange market and the reform of Chinese yuan (hereinafter “CNY”) exchange rate are closely linked with each other. Their respective journey through the past 70 years can both be divided into three historical periods; as follows: China's foreign exchange market underwent a difficult exploration period, a formation and development period and an innovative development period; in the meanwhile, the formation mechanism of CNY exchange rate also witnessed three periods marked successively by a single exchange rate system with administrative pricing, an explorative formation mechanism of CNY exchange rate and a reformed, marketized CNY exchange rate mechanism.Design/methodology/approachIn the present world, the development of almost every country is closely linked to the international community, which is the result of the heterogeneity in system, market, humanity and history, in addition to the differences in natural resource endowments and the diversity in technology, administration, information, experience and diplomacy. International economic exchanges require foreign exchange, which gives rise to the existence and development of the foreign exchange market.FindingsThe 70-year history of China's foreign exchange market has proven the need to continue safeguarding national sovereignty and interests of the people, stick to the general direction of serving economic development, adhere to the strategy of steadily and orderly promoting the construction of the foreign exchange market, keep on making innovation in monetary policy operation and unbendingly stay away from any systemic financial risks.Originality/valueDuring the 70-year history of the new China, as an indispensable economic resource in China's economic development, the foreign exchange mechanism bolstered each stage of economic development and was always an important manifestation of China's economic sovereignty. It is argued that during the 30-year planned economy that preceded reform and opening-up, China pursued a closed-door policy with few international economic exchanges. The subtext of such argument is that China did not have (or hardly had much of) a foreign exchange mechanism during this period, which is clearly in conflict with historical evidence. In fact, although China did not have an open foreign exchange market before the reform and opening-up, it had a clear foreign exchange management system and exchange rate system.

Operations of Foreign Exchange Department of a Commercial Bank

The Foreign Exchange Department of a bank performs foreign exchange operations as well as transactions. The main function of a forex department is to handle foreign inward remittances as well as outward remittances as well as buying and selling of foreign currencies. In some cases, Foreign Currency Account (FCA) is maintained for foreign transactions. The Letter of Credit is a very important import document which is issued by this department of a bank. This department also receives inward foreign remittance from the migrant workers living and working abroad. However, Foreign Exchange Department of a bank plays very important role in a countries economic growth because international business is highly depended on Foreign Exchange Department of a bank. Any foreign currency, traveller's cheques, letters of credit and bills of exchange are processed by this department.

Eficiencia del forward como instrumento de cobertura del riesgo cambiario en las empresas que realizan operaciones de comercio exterior, 2011-2017

Este artículo evalúa la eficiencia de los contratos forward derivados de la tasa de cambio dólares americanos/pesos colombianos (USD/COP), como instrumentos de cobertura de riesgo cambiario, al cual están expuestas las empresas que realizan operaciones en divisas. Para ello se analizaron los precios spot y forward USD/COP entre los años 2011 y 2017, disponibles en la Bolsa de Valores de Colombia, valorando su riesgo a través del VaR (value at risk) y evaluando sus impactos como instrumento de cobertura en riesgo de tasa de cambio. Además de la validación empírica del forward como instrumento de cobertura, se encontraron algunas ineficiencias de este instrumento financiero, debido a su baja disponibilidad y a los altos costos de transacción en el uso de este derivado como instrumento de cobertura.

Non-Usury Bank Corporation (NUBankCo): The Solution to Islamic Banking

In this paper, we are going to introduce a new Islamic financial institution with elaborated economic and financial characteristics. «Non-Usury Bank Corporation» (NUBankCo) is defined in a way that depositors are the shareholders of the Bank. This corporation is a new kind of shared ownership corporation which its shareholders are deposit holders and their deposits work as corporation’s equities. The defined bank can perform non-usury operations, and by designing a behavioral model, it is shown that NUBankCo can draw an environment that the welfare of society is to be maximized. Mobility of deposit resources in NUBankCo is less than conventional banks, and there are fewer conflicts between large and small shareholders/depositors and limits the emergence of shareholders’ cartels and thus huge sudden outflow of funds which creates bankruptcy crises.OECD’s corporate governance criteria are completely adaptable to this bank. Other pronouncements like Basel, AAOFI, IFSB, and FSF can be applied to this bank. NUBankCo can be established in different countries and can be adapted to different monetary, banking, foreign exchange, and commercial laws and regulations and can coexist in competition with conventional banks.NUbankCo will be Islamic in deposit mobilization side and will be Islamic in the loan/credit side for certain Islamic contracts and banking operations. Foreign currency exchange operations, bonds, commercial papers, and precious metals transactions, cash and draft operations, and credit and beneloan (non-interest loan) operations are characterized for NUBankCo to be fully Islamic.

Efficient Financing, Banking, and Foreign Exchange Operations in Mitigating Refined Petroleum Shortages In Nigerian Downstream Petroleum Supply Industry

Eve ry enterprise in Nigeria depends on refined petroleum product for either transportation, power, or heat source.The recurrent shortages or scarcity of petroleum products in Nigeria cripples business activities, which undermines the development of the economy. The purpose of this multiple case study was to identify the strategic role of finance, banks, and foreign exchange in mitigating petroleum shortages in the petroleum supply chain and to sustain business development in Nigeria. The study participants include ten senior leaders from two private-sector Nigerian downstream petroleum supply companies located in the Niger Delta region, who had successfully implemented strategies for petroleum supply. The resource based view theory served as the conceptual framework for the study. Data were collected through semi structured face-to-face interviews and review of operational and policy documents from the supply or marketing companies. Data were transcribed, analyzed, and validated through member checking and triangulation. The findings indicate that petroleum leaders must engage with efficient banks to obtain loans or letter of credit, liquidate letter of credit on time, obtain foreign exchange at best rates, and avoid documentation hitches and delays on international transactions.Findings may be used by petroleum business leaders and investors to create effective and efficient financial resource management strategies in the supply chain, leading to product availability, sustainability, poverty reduction, and economic development.

Open FX Forwards: Introducing a Standard Mark-to-Model Approach

This paper focuses on the mark-to-model valuation of open foreign exchange (FX) forwards, a popular instrument for hedging FX exposures with higher degree of flexibility with respect to settlement date and settlement amount compared to (standard) closed forwards. While there is sufficient coverage of valuation models and risks of closed FX forwards in literature (see e.g. Hull 2012), we observe limited or no coverage on open forwards in spite of the increasing utilization of those hedging instruments globally. The paper introduces a standard mark-to-model approach for open FX forwards in dependence of the window period of the open FX forward, with the model being tested using swing-option pricing methods based on the Longstaff-Schwartz algorithm (Longstaff and Schwartz, 2001) as well as forward-based pricing approaches (Hull (2012), Jorion (2010)). To our knowledge, this is the first paper focusing on mark-to-model valuations of open FX forwards within the framework of a stochastic model.

Somalia

The CBS has taken steps to establish important pillars of a proper policy framework for financial reporting, auditing, and internal controls by approving the Internal Audit and Audit Committee Charters and is committed to address the remaining shortcomings in these areas. The Internal Audit Department (IAD) has made progress by initiating risk assessments of the various CBS business units and recruiting an Information Technology (IT) professional to join the team. The Accounting and Finance Department (AFD) is making progress in implementing accrual accounting, and accounting for foreign exchange operations (International Accounting Standard (IAS) 21), and has created a new role of Reconciliation Officer to ensure all cash transactions are recorded properly. However, the IAD functions without a director, which places the internal audit staff at a severe disadvantage to other departments and limits their authority to effectively implement their program. Also, while the mission team has stressed the importance of adopting International Financial Reporting Standards (IFRS) during this mission and the previous mission, the CBS has not formally indicated that it will adopt this framework.2 High priority recommendations were made to address these shortcomings. See Table 1 for homework assignments and high priority tasks.3