Forward transactions by nonbank residents no longer need to be related to underlying commercial transactions real demand principle. Since July 2, , banks have been able to deal directly with each other in foreign exchange transactions excluding U. On February 1,, U. Authorized banks are freely permitted to buy and sell convertible and inconvertible currencies, both spot and forward, against convertible currencies and inconvertible currencies. They are free to deal with residents and nonresidents, whether banks or nonbanks. Forward exchange contracts are not limited as to delivery period nor is an underlying transaction required.

Residents may conclude forward transactions with authorized banks for any period. The intermediation of authorized banks is not obligatory in those forward currency transactions in which the guilder is not involved.

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Authorized foreign exchange dealers are permitted to conclude freely with their customers forward exchange contracts to buy or sell foreign currencies in exchange for New Zealand dollars, irrespective of the purpose for which the funds are required or the sources from which they are obtained. They are subject only to prudential exposure limits agreed between the dealer and the Reserve Bank of New Zealand.

These forward contracts may be for either a fixed term or optional delivery dates. The Reserve Bank does not maintain margins for forward exchange transactions. Authorized foreign exchange dealers are free to set their own rates of forward transactions with their customers. General access to the forward exchange market for residents and nonresidents was established in Until August 26, , the Reserve Bank of New Zealand quoted official forward premiums and provided backup cover to commercial banks.

Forward premiums and discounts are left to the interplay of market forces. Forward transactions with nonbank residents by authorized banks and foreign exchange brokers must have a commercial basis. On July 9, the Norges Bank extended general authorization to commercial banks to write foreign currency options for nonbank residents. Option contracts can be employed under the same rules applied to forward transactions.

Authorized banks are allowed to operate in foreign markets for spot and forward transactions related to commercial operations, and the amortization of financial credits. Forward cover may be provided to residents for all permitted foreign exchange receipts, import payments, current invisible transactions, and amortization payments.

Forward contracts may not exceed 12 months, and forward purchases and sales of foreign currency are restricted to currencies admitted to the Madrid foreign exchange market and the ECU. The terms of the forward contract must coincide with the terms of the commercial or financial transaction being covered. The forward position of an individual bank at the close of each day must not reflect a net buying or selling position in U. In addition, most commercial banks can freely purchase foreign exchange in the spot market to cover a forward contract 12 months prior to the maturity of contract.

The present regulations governing forward exchange trading have been in effect since April 1, On June 15, , the banks were allowed to cover their forward positions in the spot market six months before the due date. The original period was 15 days; in the limit was raised to 12 months. Authorized banks may conclude forward exchange transactions with residents in foreign currencies against Swedish kronor without restriction on each occasion when a forward transaction is allowed, currency options may be concluded alternatively. Forward transactions may be concluded only to cover payments for which an agreement exists.

However, export firms may make forward sales for settlement on the envisaged date of payment or, when tendering, on the expiry date for tendering. Authorized banks may without exceptions conclude with residents forward transactions in any foreign currency against another foreign currency. Authorized banks may buy from and sell to other authorized banks, foreign banks, and nonresidents, forward, any foreign currency against another foreign currency or Swedish kronor.

Limits are placed on the net foreign exchange holdings, spot and forward, of each authorized bank. On October 20, the prohibition of forward transactions with foreign banks in the currency of a third country was lifted.

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Forward exchange transactions between authorized banks and nonresident nonbanks were permitted in March On February 1, , all forward foreign exchange transactions were permitted without restrictions, provided that they take place through an authorized bank. Authorized banks were allowed to enter into forward contracts with nonresidents for periods exceeding 12 months.



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There is an active forward exchange market in Switzerland. Both residents and nonresidents may freely negotiate foreign exchange contracts with banks in all currencies for both commercial and financial transactions. No official fixed premium and discount rates are applicable to forward exchange contracts. All forward exchange transactions are negotiated at free market rates.

Limits on forward sales of Swiss francs to nonresidents were lifted on March 11, A currency option scheme under which exporters were able to purchase currency options from the Swiss National Bank to cover up to 40 percent of their export proceeds for up to two years forward was discontinued on November 30, Effective April 1, , the Federal Government ceased to provide exchange risk insurance to exporters. Banks are allowed to engage in spot and forward exchange transactions in any currency, and they may deal among themselves and with residents and nonresidents in foreign notes and coin at free market rates of exchange.

There is a free forward exchange market. Commercial banks offer forward exchange facilities to both residents and nonresidents. There are no limits on contract maturities. Forward exchange rates fluctuate in response to market conditions. Introduced in August , this scheme was designed to compensate exporters of specified products for declines in the real price of exports, including changes in export taxes and rebates, that might accrue between dates of contracting and shipment.

In the case of contracts containing a price readjustment clause, the reimbursement rate would be set at percent. In the case of contracts not containing a price readjustment clause, 90 percent of the decline in the real price would be reimbursed. However, the Argentine authorities do not expect that any payments will need to be made under the scheme, because of the policy of avoiding a real appreciation of the austral. In June , the Central Bank introduced a scheme under which private sector borrowers could obtain exchange rate guarantees for new loans contracted, or old loans extended, for a period of at least days.

A fixed premium, with an intentional subsidy, was charged for this exchange rate insurance during the first days of the contract. In July , immediately after a large devaluation of the peso, another scheme was introduced under which private sector debtors could obtain guarantees on loans outstanding prior to the devaluation, provided that they obtained at least a one-year extension of the term of the loan.

The guaranteed rate was the predevaluation rate adjusted for subsequent inflation differentials, although even more generous terms were offered subsequently. Loans covered by guarantees issued in could be rolled over under the new scheme. The first maturities on loans covered by exchange guarantees issued in fell due in December , by which time the average guaranteed rate on such loans was one tenth of the actual official rate.

Since the Central Bank neither had the foreign exchange to cover the repayment of these loans nor was willing to permit the monetary expansion which would have resulted from renewal of the loans by the private sector at the current exchange rate, it issued regulations requiring that all loans covered by guarantees issued in be rescheduled on maturity, according to specified minimum terms. The foreign creditor was given the option of either accepting Government of Argentina securities denominated in U.

In the latter case, U. Under either option, the private sector debtor would pay the Central Bank the domestic currency required to cancel the loan at the guaranteed rate. In June , the same mandatory rescheduling provisions were extended to loans covered by the guarantees. However, most of the related U. The obligations due to commercial banks were rescheduled as part of a refinancing package, through the issuance of U. Loans covered by guarantees that fell due in were rescheduled by issuing similar notes with a ten-year maturity.

Obligations due to commercial banks were rescheduled as part of the rescheduling agreement, while obligations to other creditors were to be refinanced separately. Forward facilities with regulated premiums are available at authorized banks as follows: for periods of up to six months for export proceeds and import payments; for three months for remittances of surplus collection of foreign shipping companies and foreign airlines; and for settlement in Asian Monetary Units AMUs for transactions under the Asian Clearing Union. Authorized dealers are not permitted to pay any premium for purchases of forward exchange above the spot rate.

Policies for Developing Foreign Exchange Markets; Occ. Paper No. 60

For commercial forward sales, they are allowed to charge taka 0. At the end of December , this amounted to a premium of 0. When the designated dealers sell foreign exchange forward for imports under official loans, credits, or grants, they are allowed to charge 5 percent in addition to usual commissions and charges. The Central Bank provides forward cover to authorized dealers at a premium also fixed at taka 0.

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Because of the regulated premium, which is low in relation to international interest differentials, the dealers cover all their authorized forward exchange commitments with the Central Bank. The regulated premium has in recent years been smaller than the rate of depreciation of the taka against most of the currencies in which forward facilities are available, and private sector importers will usually have profited from taking such cover while the Central Bank will have incurred losses.

However, available data for the period —85 show that the volume of forward exchange purchases by the Central Bank exceeded the volume of its forward exchange sales to importers by large margins, because imports under the Secondary Foreign Exchange Market are covered against the exchange risk by the requirement of advance purchase of U. As a result, the Central Bank during this period offset its losses through the gains made from purchases of foreign exchange from exporters see Chart 1 and Table 6.

The scheme is composed of two parts. Under the first, the Government will provide exchange rate guarantees to projects in which foreign currency loans had been or will be disbursed between July and June The scheme is available to both public and private sector borrowers at an annual charge of 2.

Effective from March 28, , foreign currency term loans channeled through the nationalized commercial banks on the basis of relending by the Government have also been made eligible for cover under EFAS. Under the second part, lending institutions are permitted to convert part of exchange losses on foreign currency loans outstanding at end-June , on which overdue repayments exist, into preferred shares or debentures. In April , it was announced that only loans disbursed by the three development finance institutions would be eligible for cover under the EFAS.

At the end of , a fixed exchange rate was replaced by a flexible exchange rate system.

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In order to alleviate the financial burden on both the private and public sectors of the resulting sharp depreciation of the colon, the Central Bank issued, beginning in mid, exchange guarantees at the previous official exchange rate of C 8. For the public sector these transactions included foreign currency expenditures of the central government and imports of petroleum, medicine, and wheat. For the private sector these included unpaid imports, debt repayment of registered capital, pre-export financing of coffee, and student remittances.

A large proportion of the guarantees took the form of U. These CDs were to be redeemed in equal semiannual installments over three years, with the first installment falling due in October Since most of these CDs were issued at the exchange rate of C 8. Apart from the potential losses arising from the issue of CDs, the amount of exchange subsidies actually paid by the Central Bank is estimated at around C 4 billion in and C 2 billion in , of which C 0.

The losses in and taken together were equivalent to the total outstanding currency issue at end The value of exchange subsidies declined to C 0. Monetary policy during —83 was largely directed at neutralizing the expansionary impact on domestic credit of the large exchange losses incurred by the Central Bank. For this purpose, the Central Bank relied heavily on the placement of stabilization bonds with the private sector the amount outstanding rose from C 0.

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The interest cost of these operations has resulted in further large operating losses for the Central Bank after In exceptional circumstances, the Central Bank may provide forward exchange cover in U. In practice, the Central Bank does not do so. The Exchange Credit Guarantee Corporation of India Limited administers an official insurance scheme that provides forward exchange cover for exports of engineering goods, turnkey and civil construction contracts, and service contracts where payments are to be received in installments deferred beyond 12 months.

The cover is offered in French francs, deutsche mark, Japanese yen, pounds sterling, Swiss francs, U. See Chart 1 and Table 7. The swap entails a spot sale of foreign exchange to Bank Indonesia, matched by a forward purchase at a price more favorable than that ordinarily available from commercial banks.

The facility was initially available to cover import transactions and short-term borrowing, but since January the swaps have been provided to cover bona fide offshore borrowing only. Until October , the volume of swaps was subject to ceilings that applied both to the total volume outstanding and to individual financial institutions. The ceilings were then eliminated, while the terms on which the swaps were offered were made less advantageous.

Bank Indonesia initially set charges on swap contracts at 2. In , however, the demand for swaps increased sharply as speculation against the rupiah intensified and interest differentials and the forward premiums charged by banks widened. Thus in October Bank Indonesia imposed a limit of 2 percent per annum on the margin above the Bank Indonesia premium that banks could charge on any forward transaction backed by a Bank Indonesia swap. In February , this limit was reduced to 0. Bank Indonesia swaps have maturities of 30— days, but are renewable. Bank Indonesia swap charges were raised again in March , to a range of 4.

After , however, the demand for Bank Indonesia swaps again increased, and the ceilings referred to above were frequently binding.