Category

FX

BankingFXRegional
February 4, 2021

Cash Pools in Asia for Corporates Trying to Access Funds in China

NeuGroup members describe cash pools designed to overcome obstacles and minimize taxes.Several members of NeuGroup’s Life Sciences Treasury Peer Group have set up cash pools in China relatively recently, a topic they discussed at their fall meeting in 2020 and in follow-up email exchanges with NeuGroup Insights. The pools are generally a means to an end: getting access to the funds in a country where that can be difficult and expensive. Two-way sweep. One member is using what she described…
Justin Jones
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BankingFXRisk Management
February 2, 2021

Under the Hood: How Banks Price FX Swaps With Corporates

Wells Fargo explains credit and capital charges for corporate counterparties on derivative transactions.Corporates that are using or considering using long-dated hedges such as five-year FX forwards or swaps can benefit from understanding the way banks price derivatives using a combination of credit and capital charges. That idea surfaced during a recent meeting sponsored by Wells Fargo for NeuGroup members who manage foreign exchange risk. Credit and capital costs can impact unwinds and restructurings as well as new transactions, Wells Fargo…
Justin Jones
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FXTalking Shop
January 21, 2021

Talking Shop: Net Investment Hedging Programs

Member question: “Anyone have a net investment hedging program? If so, how often are you rolling hedges? “What is your typical tenor? Are you hedging 100% or something less?” Peer answer: “We have done some opportunistic NIH hedging in JPY with FX forwards. We generally use our EUR capacity for debt issuances as well. Hedges have been in the two- to three-year range. “We will go up to 100% of capacity (we do not seek to push to the 125%…
Justin Jones
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ComplianceFXTalking Shop
January 12, 2021

Talking Shop: Derivative Regulatory Compliance in Hedging Programs

Member question: “Our hedging programs have trading entities in multiple jurisdictions requiring continual monitoring of derivative regulatory compliance regulation. This is mostly handled internally, leveraging external counsel to advise on specific topics and questions. “How do others manage derivative regulatory compliance such as EMIR (European Market Infrastructure Regulation), FMIA (Financial Market Infrastructure Act) and others? Do you outsource, handle internally, hybrid solution or is it not applicable? Are there advisors that you would recommend?” Peer answer 1: “My company is…
Justin Jones
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FXRisk Management
December 17, 2020

Laddering: FX Risk Management with Less Work, Fewer Transactions

Wells Fargo explains an alternative to layering for corporates hedging cash flow exposures. Who doesn’t want to get more for less? As in less work, more efficiency and fewer transactions, all while still meeting risk management goals. To take advantage, though, you have to be willing to look closer at the shortcomings of the very common cash flow hedging approach known as layering. During a recent interim meeting of NeuGroup’s two FX managers’ peer groups, the quantitative solutions team at Wells…
Justin Jones
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BankingFXTalking Shop
December 15, 2020

Talking Shop: How Do You Restrict Trading for Currency and Bank Pairings?

Member question: “Question on restricting trading for certain currency/bank combinations: We have a few currencies that some banks have trouble settling with us (such as RUB). I want to avoid trading with these banks for those currencies. “Ideally, I could set up a rule in FXall to restrict specific bank/currency combinations. Does anyone have suggestions for doing this? Thanks!” Peer answer 1: “I believe that in FXall’s QuickTrade set-up, you can select/designate standard counterparty banks to populate for specific currencies…
Justin Jones
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FXRisk ManagementTalking Shop
December 10, 2020

Talking Shop: What Did Your Transition Plan to Hedge Accounting Look Like?

Member question: “What did your transition plan to hedge accounting look like? “We are planning to adopt hedge accounting in the future. In terms of transitioning a book of hedges to designated hedges, we will close all existing undesignated hedges and put on a new book that is designated at inception.“We are curious how others have put on these new hedges. How long did you take to put on hedges? Did you trade all at once, daily, weekly, etc.? Also,…
Justin Jones
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FXRisk ManagementTechnology
December 8, 2020

An Early Warning System to Flag Excessive Counterparty Credit Risk

One corporate’s proactive approach to measuring and managing FX and other counterparty exposures.Using credit ratings from S&P, Moody’s and Fitch is one way corporates establish maximum credit limits with counterparties. But at a meeting of FX risk managers sponsored by Wells Fargo this fall, one company described some shortcomings of that “classic approach” and explained an alternate method that enables it to take action before exposures reach unacceptable levels.Proactive vs. reactive The company’s director of liquidity and investment management said…
Justin Jones
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BankingFXTalking Shop
December 1, 2020

Talking Shop: Whom Do You Pay Using Your Offshore Renminbi Account?

Member question: “Has anyone opened a CNH (offshore renminbi) account? And if so, what do you use it for? Do you: a) pay onshore China vendors, b) offshore vendors?”Peer answer: “Yes, we have a CNH account in Singapore. We bill to our local distribution entities in local currency and we use the account for intercompany receivables before converting to USD. We make FX settlement payments from the account.” For more insights on trends in Asia from NeuGroup Members, read founder…
Justin Jones
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FXTalking Shop
November 5, 2020

Talking Shop: Taking the Pulse on Forward Points in Balance Sheet Hedging Programs

Member question: “How do those with balance sheet hedging programs account for forward points—are they included in earnings before interest and taxes (EBIT), below the line, etc.? “We are considering implementing a balance sheet hedging program for net liabilities that are not part of our cash flow hedging program. ​Forward points are a concern since i) they work against us and ii) they may introduce volatility if the hedge is not valued at spot while the underlying exposure is. Any insight…
Justin Jones
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