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  • Topic: Foreign exchange market, Currency, Exchange rate
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  • Published : May 14, 2013
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Central Directive
FromVon

2
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1/7
Date

C/FI

Dealing and Risk Management of Foreign exchange and Money Market Transactions

C/FIT Kern

01.07.2007

1.

Subject This Central Directive governs the responsibilities and duties within C/FI based on the RB/GF 116 Guideline.

2.

Universally applicable definitions The opening of a business relationship for foreign exchange and money market dealings may only be considered with financial institutions of first rate credit standing, which after C/FI approval, have been included on the list of approved banking partners (Appendix 1)1. Executed transactions are to be kept within the respective bank’s limit on the current Banking List. A corporate agreement covering forward financial transactions should also be executed with institutions that are authorized for foreign exchange transactions. Only the C/FIT employees listed in Appendix 21 are authorized by C/FI to execute transactions up to their respective upper limits2 The selected financial institutions will be notified in writing that these employees are authorized dealing partners.

3.

Settlement of foreign exchange transactions Principle All foreign exchange transactions are recorded in the Treasury system and consecutively numbered. Settlement notes are stored by C/FIF1. C/FI receives a daily summary of executed transactions. The end-of-month summaries of outstanding forward exchange transactions requested from the relevant banks are to be reconciled by C/FIF with the transactions recorded in the Treasury system. Once reconciliation has been completed, C/FI Middle Office will receive a monthly report of outstanding foreign exchange transactions. Checking, settlement and monitoring of foreign exchange transactions are governed in a separate C/FIF1 directive. C/FI Middle Office is responsible for monitoring compliance with this directive. Foreign exchange transactions with banks Dealings External foreign exchange transactions are normally conducted using the electronic trading platform = EHP (currently Fxall). Exceptions are allowed in cases where: • EHP is not available due to technical problems (e.g. no network connection) • Currency pair is not handled on EHP • Financial instrument cannot be handled on EHP (e.g. cross-currency swap) • Volume exceeds the normal limits (depending on the currency and the term)

1

The most current version always applies

Version/Revision

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Central Directive
FromVon

2
Author

2/7
Date

C/FI

Dealing and Risk Management of Foreign exchange and Money Market Transactions

C/FIT Kern

01.07.2007



If a particular bank is preferred for technical settlement reasons (e.g. settlement of same day transactions)

As a basic principle, at least two comparable quotations need to be obtained from banks or electronic exchange rate information systems and documented. Breaking down a transaction into several individual transactions does not override the maximum limits per employee defined by C/FI. Documentation After execution of a transaction, the employee involved in the foreign exchange transaction documents the trade immediately in the Treasury system (currently ITS from Ecofinance; using the FXall ITS interface) and must create and sign a settlement note. If a foreign exchange hedging transaction meets the requirements of IAS 39 and runs beyond the year’s end, and Hedge Accounting is expected to be used for the next year-end accounts (Check with C/FIA), the hedging type (cash flow or fair value hedge) must noted on the relevant foreign exchange transaction and special documentation created.

Monitoring and Compliance All settlement notes are immediately passed on to C/FIF1 (back office). The matching of the transaction with the bank confirmation normally takes place through the FXall Settlement Centre. C/FIF1 checks whether the transaction was matched up and signs the settlement rate. If due to technical...
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