Insurance against currency risk

Get rid of uncertainties due to cash flow changes.

Who is it for?

Corporate clients

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Corporate clients with business operations in international environment.
Key advantage

Independence of financial transactions

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Financial transactions do not depend on sudden changes of currency movement.
Possibilities of choice

Various funding instruments

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Choose among various funding instruments.

Insurance against currency risk is intended for legal entities operating in international environment. Due to a change in exchange rates, uncertainty arises in business operation because of a change in cash flows which the company plans under the head of already conducted transactions.

To protect you against currency risk, SKB Bank offers you various derivative financial instruments that are adapted to your business operation and needs.

Conditions for taking out insurance:

  • Signing of the Fundamental contract on transactions with derivatives.
  • Valid LEI number.
  • Signing of the Reporting arrangement (the EMIR regulation).
  • Approved overdraft limit for entering into derivatives.
  • Open transaction account with SKB d.d.

Different financial instruments

Forward

A forward is a binding agreement between two parties on the purchase or sale of an agreed amount of a certain currency at a fixed (forward) exchange rate on a specific day in the future. The maximum period in which forward transactions can be entered into is up to two years.

The forward exchange rate is determined based on differences in interest rates of both currencies and the current market (spot) rate. Accordingly, the forward exchange rate may be higher or lower than the current exchange rate.

 Advantages:

  • You can ensure a fixed/known exchange rate for any future date.
  • You enjoy full protection against an adverse change in the exchange rate.
  • No additional costs.

Disadvantages:

  • You do not gain in the event of a favorable change in the exchange rate.

American Forward

An American forward is a binding agreement between two parties on the purchase or sale of an agreed amount of a certain currency at a fixed exchange rate in the specified period agreed in advance. In this transaction, you do not have to indicate an exact date, but you only specify the period during which you will buy or sell a certain amount of foreign currency. The maximum period in which transactions can be entered into is up to two years.

During this period, you have the option to partially change any amount of foreign currency at any time, and SKB ensures you an unchanged exchange rate for the entire amount and the whole period. You have to use the total amount of purchased or sold foreign exchange by the end of the agreed period.

Advantages:

  • You can ensure a fixed/known exchange rate for the period of up to two years.
  • You enjoy full protection against an adverse change in the exchange rate.
  • No payment of a premium or no additional costs.

Disadvantages:

  • You do not gain in the event of a favorable change in the exchange rate.
  • The exchange rate is slightly worse than in the case of a traditional forward due to flexibility.

Currency swap

Currency swap is a binding agreement between two parties on:

  • A simultaneous spot purchase or sale of a certain amount of a certain currency.
  • A simultaneous forward sale or purchase of the same amount of a certain currency.

Currency swap enables you to regulate liquidity in a certain currency or to adjust the date of transactions previously concluded to protect against exchange risk.

Currency options

A currency option gives the option buyer the right, but not the obligation, to sell or purchase a certain amount of foreign currency at the agreed exchange rate on a specified day (or in a specified period) in the future. The option buyer determines the exchange rate, the amount and maturity of the option.

The option buyer decides on whether to use the option or not when the option falls due. If the market rate is more favorable at maturity date, the buyer will purchase or sell the foreign currency at the market rate.

For their right, the option buyer has to pay the option issuer a lump sum premium when the transaction is concluded.

Advantages:

  • You enjoy full protection against an adverse change in the exchange rate.
  • You can gain in the event of a favorable change in the exchange rate.

Disadvantages:

  • Payment of a premium upon concluding the transaction.

Treasury Sector

Employees in the Treasury Sector will be glad to provide any additional information or clarifications.


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In accordance with the Decision of the Bank of Slovenia No: 38.20-0005/18 of 04 January 2018 on granting an authorization for the exemption of intra-group transactions from the obligation to exchange collateral according to the EU regulations EMIR, SKB banka d.d. Ljubljana (SKB Bank) applies the entire exemption as regards the exchange of collateral in transactions with OTC derivatives (IFI) with the counterparty Societe Generale S.A., Paris (SG Paris) - intra-group transactions. SKB Bank (LEI Identifier: 549300H7CCQ6BSQBGG72) and SG Paris (LEI Identifier: O2RNE8IBXP4R0TD8PU41) are part of the same Societe Generale Group and both financial counterparties based in different EU Member States. The nominal total amount of agreements on OTC derivatives that are subject to an exemption within the group amounts to EUR 2.5 billion.

 

Insurance against currency risk

Documents under the PRIIP regulation

Get acquainted with documents including key information for retail investors concerning derivatives of SKB Bank d.d. Ljubljana, which are traded with outside stock exchanges (OTC). Documents are not marketing material.

If you wish, we will, at your request and free of charge, provide you with the requested document including key information in printed form.

Treasury Sector

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