1. 1 Foreign Currency Accounts

2. 2 When should one be opened Where should one be opened Advantages /disadvantages of opening Evaluate costs of maintenance

3. Foreign Currency Accounts (FCYa/cs) When 3 Short answer is….. When the volume or value of business warrants it. - company exporting goods to Thailand, 20 sales a year of GBP equivalent 20,000 each, local sales office and also imports raw materials from Thailand. Would you open an account?

4. FCY a/cs where to hold accounts 4 Three choices - in your domestic locality, staying at home - in the country of the currency, going native - in a third location (Treasury Centre)

5. FCY a/cs Where 5 Banking relations Transfers between local currency and foreign currency Cut-off times Cheque deposits Receipt of credit transfers from customers in country of currency

6. FCY a/cs Where 6 Balance reporting and statements Interest on credit balances Problem resolution Language Tax and permanent establishment Delivering payment instructions to bank Commissions and fees

7. FCY a/cs cost/benefit 7 What costs or charges do we incur with a FCYac? What costs or charges do we incur without a FCYac?

8. FCY a/cs Costs 8 Value dating Commission charges Transaction charges - per item - based on value i.e. 2 per mille with a max and min Turnover charges

9. FCYa/cs Costs 9 Lifting fees Account maintenance fee Cable or telex charges Correspondent charges Period end billing

10. FCY a/cs Other Issues 10 Multicurrency accounts Interest on bank accounts Withholding taxes Stamp duties on loans Notional pooling and concentration Thin capitalisation Central bank reporting (x border flows)

11. What is your solution? 11 Given the following set of circumstances state how the company would make the required payments and from which account and location. Give full reasons for your decision. Company A, based in the USA has revenues from various EUR based countries. Company A has to make a small number of payments to non EUR countries. The payments vary in size from EUR 5,000 to EUR 2,500,000 equivalent.

12. Suggested Solution 12 The company would open an euro account, the location dependent on volumes and the type of payment method used by customers (cheques being used?). For the payments, assuming a very small number in each different currency, the company would do a cost analysis of opening vs not opening an account. It would probably not open a currency account but would make the larger payments from the EUR account via a FX deal rather than from the USA to avoid round tripping. For the smaller payments the company might do the same or use a currency cheque, drawn on an account convenient for the beneficiary, if the beneficiary agrees.

13. Your Solution? 13 Company B, a Pension Fund based in the UK, has a large number of payments to make in GBP to pensioners in the UK and in EUR to pensioners in the Eurozone. The payments are made to a specific value date no later than the last Wednesday in the month, assuming it is a business day.

14. Suggested Solution 14 The question does not say where the income is coming from but assuming it is GBP and EUR premiums, then the company would have an account in each currency in, say, London and Frankfurt respectively. EUR payments would be made by SEPA credit transfers at low domestic rates and the GBP would be made by BACS to keep costs low and hit value dates. Any shortfall in either account would be funded from the other account.