FX Swap

Guarantee liquidity without currency risk

In a FX swap, the client simultaneously buys and sells one currency to buy another currency, with both transactions having different values – one executed on the trade date and the other on a forward date. On the one hand, through the FX swap the client converts cash from one currency to another currency, thus providing short-term liquidity in a different currency, and on the other hand guarantees the exchange rate on the forward date.

Features of FX Swap

Two deals with different directions and dates combined in one product

Provides liquidity in a given currency

Guarantees the exchange rate for the reverse maturity transaction

Example: The client has USD 1,000,000 and wants to secure short-term liquidity in EUR, while after 3 months it has to make payments to suppliers in USD, worth USD 1,000,000. For this purpose, it concludes a currency swap with the following two legs:

1st leg, 01.09.2021: The client sells 1,000,000 USD and buys EUR at the rate of 1.1817
2nd leg, 30.11.2021:The client buys 1,000,000 USD and sells EUR at the rate of 1.190

Target market of the product

The FX Swap is a financial instrument, which the Bank manufactures and distributes as a product. The table below sets out the criteria for determining for which client profile the product is compatible with or not.

	Positive	Negative
Type of clients	all types of clients: retail, professional and eligible counterparties
Clients’ knowledge and experience	- the movement and the possible expectations regarding the hedged reference values; - lost profits or realized losses related to a negative change in reference values; - hedging cash flows and providing liquidity in a currency other than the base currency by entering a FX Swap in relation to future receipts or payments on liabilities, or providing current liquidity in a currency other than the base currency; - the process of permanent collateral maintenance	does not meet the indicated knowledge and experience requirements
Clients’ financial situation with a focus on the ability to bear losses	ability to bear a negative result due to FX rate change within the term of the instrument and its maturity
Clients’ risk tolerance and compatibility of the risk	low-risk profile, due to the ultimate objective to provide current liquidity in a currency other than the base currency	inclined to bear the risks of negative deviations of the reference values
Clients’ objectives and needs	to hedge or to provide liquidity in a given currency