The result of the bank’s work is primarily associated with a competent “game” at exchange rates. And since this is a game, someone always loses. However, in the case of the bank, not only he suffers, but also his clients. Therefore, the investor, like no one else, should be interested in what the bank’s currency position is, because it is precisely from it that the possible losses or losses associated with changes in the exchange rate will depend. And all his further fate depends on it!
So what is a currency position, and how does it affect the efficiency of a bank?
First of all, this is the ratio of the requirements and obligations of the bank, calculated in a separate currency, the operations with which it produces. However, it can be open and closed. An open currency position means that the amounts of claims and obligations in this particular currency do not match, i.e. in case of a change in its exchange rate, the bank will have profit or loss. Distinguish between long and short open foreign exchange position. If the foreign exchange position is long, then the bank receivables exceed the payables, i.e. he wins when the foreign exchange rate rises, and he loses when it decreases. The short position, in turn, suggests the exact opposite: the bank’s obligations to its creditors exceed the requirements for its debtors, so it is not the increase, but the depreciation, that is beneficial.
Many, of course, now thought that it was much better for the currency position to be closed: and there was no need to worry about any risks, however, how then to get such a desired high profit? Of course, this is a profit of a speculative nature, behind which is a skillful game at exchange rates and which is not stable. However, do not rush to worry, because the state regulates the maximum size of an open position of a bank depending on the amount of its assets. In addition, the bank itself is interested in the correct determination of currency risk, and, consequently, monitors changes in market conditions.
In fact, even the worst-case scenario for a bank will not affect you as its client and depositor in any way, because even in this case your deposit would be paid to you from a reserve or authorized fund of the bank. Moreover, the bank constantly monitors the forecasts of the dynamics of exchange rates with which it works. Also, a constant conversion of open positions to closed positions is carried out by transferring liabilities and claims first to one of the
freely convertible currencies, and then the national currency. In 2012, the
Central Bank of the Russian Federation established that an open foreign exchange position cannot exceed the bank’s capital by more than 10%, and the amount of open positions is 20%.
As you can see from these figures, the bank’s currency position is tightly regulated by the state, and the situation when the
assets and liabilities for a particular currency are not equal to each other is under special attention, therefore,
bank customers have no reason to worry. However, reading at your leisure about banking, currency risks and the types of currency positions of the bank will definitely not hurt you!