Currency Position

 Banks are operational in foreign currency operations. When buying / selling them, an asset (requirement) is formed in that currency and there is a answerability (obligation) formed in another. Therefore, banks have demands and liabilities in several unorthodox currencies which are heavily influenced by currency argument rates.

The likelihood of loss or profit hence of adverse changes in the dispute rate is called currency risk.

The ratio of assets and liabilities of the bank in foreign currency determines its currency approach of view. If requirements and obligations of a bank in unlimited currency are equal, the currency perspective is closed but if they there is a mismatch - it is called right of admission. Closed contract is a relatively stable disclose of the banking sector. But receiving a profit from the alter in the dispute rate following this bargain is impossible. The realize into one in outlook can be "long" and "curt". The incline is called as long" (if requirements exceed obligations) and "rapid" (obligations exceed requirements). Long approach in a determined currency (along together along with than the Bank's assets in the currency exceed the liabilities in it) bears the risk of loss if the dispute rate of that currency falls. Short currency incline (when the liabilities in that currency exceed its assets) bears the risk of loss if the row rate of this currency will rise.

The along with operations shape the currency positions of banks:

 Receiving assimilation and supplementary allowance in foreign currency.

 Conversion operations behind the unexpected delivery of funds

 Operations behind Derivatives (adopt and futures transactions, agreement forwards, swap deals, etc.), for which there are requirements and liabilities in foreign currency, regardless of the method and form of settlements for such transactions.

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To avoid currency risk, one should struggle for a closed slope for each currency. It is possible to compensate for the imbalance of assets and liabilities moreover the volume of the currency bought and sold. Therefore, advertisement banks should make lithe systems of supervision of currency risks. Authorized bank can have an right of entry currency position from the date of receipt from the National Bank a license to make operations in foreign currency values. In order to avoid risks, or losses in currency transactions; the Central Bank sets the standards for an right of right of entry currency approach. This appreciation to the regulation of foreign quarrel risk is based regarding international banking practices as skillfully as recommendations of the Basel Committee concerning the subject of banking government. In the UK the parameters of the access currency outlook is restricted to 10% and 15% of the Bank's capital and in France 15 % and 40 %, the Netherlands - 25 % respectively.