Conversion operations are a necessary element when concluding transactions; they are carried out in foreign currency. This type of operation is in demand by enterprises engaged in foreign economic activity (FEA) and concluding contracts with non-residents under which obligations must be fulfilled in foreign currency.
Direct conversion transactions are transactions involving the exchange of certain amounts of the currency of one country for the currency of another, followed by settlement of the transaction using the received currency on a certain date. As a rule, conversion operations are carried out by banks, which become intermediaries between companies conducting foreign trade activities and their foreign partners. It is worth understanding that a conversion operation is not at all a currency exchange, which we are used to seeing in kiosks. This is a special type of financial transaction, the essence of which is not so much in the exchange itself, but in the further use of the currency that appeared as a result of the exchange on the client’s account.
Conversion operations in international practice
Interesting fact: in international practice, conversion operations are called Foreign Exchange Operations, or Forex for short. And this is not a coincidence: indeed, today the global over-the-counter Forex market, known for its speculative operations, initially served precisely conversion purposes. This best reflects the essence of these transactions: counterparties from different countries with accounts in different currencies need to quickly complete a transaction, for which they must exchange money on the foreign exchange market to bring them to a common denominator.
It was no coincidence that the definition of conversion transactions indicated that transactions were made on a specific date. The delivery time of money to the account, or, as it is called in the professional financial environment, the value date, is the most important element of the conversion operation, since the value date determines when exactly the money in the required currency will arrive at the desired account.
Depending on the value date, conversion transactions can be:
- spot, that is, instant or current. Executed at the current rate relevant at the time of the transaction;
- forward or urgent. They are carried out at the forward rate, with a deferred value date. Today, they are widely used for speculation, since the most common forward conversion operation is a currency swap, that is, a combination of two differently directed operations spaced apart in time in one operation. For example, this could be buying a dollar for a euro with a deferred sale of a dollar and receiving euros.
In international practice, “Spot” value terms imply a value date on the second banking day after the transaction. This is done so that market participants can, after concluding a contract, prepare all the necessary documents for the transaction. In Russia and the countries of the former USSR, this practice has not taken root and conversion operations are carried out differently.
Conversion operations in Russian: what do Russian banks offer?
The practice of currency transactions in Russia is due to the time difference with the United States, as well as the traditional love of domestic bankers for the cash method of making transactions. Today, Russian banks offer conversion transactions on the dollar/ruble and euro/ruble currency pairs with value on the current banking day -Tod or on the next banking day -Tom. Spot terms are not offered.
Postings with a value date of “today” for the dollar/ruble and euro/ruble currency pairs are carried out throughout the business day, since most Russian banks accept payment orders for posting until 18:00, and sometimes until 21:00 Moscow time. The eight-hour time difference with the United States allows Russian transactions to slip through the window before the opening of the banking day in America. Accordingly, at the time of the start of postings in the United States, all Russian conversion transactions are already awaiting processing.
It is worth noting that banks make transactions at their own internal rate, and not at the current market spot rate, as is common in international practice. Because of this, there may be some deviations in the amounts received. Different banks have different rules for carrying out conversion transactions. Most often, the rate for major currency pairs is set once a day, based on the closing rate of the spot market of the previous day. In some advanced banks (which is not so common), adjustments may be made during the working day. Some banks offer special service conditions for large clients, including preferential currency exchange rates.
Forward conversion operations are also carried out - both unilateral and with a subsequent reverse operation (swap). As a rule, banks offer forward transactions only through telephone transactions, and not through information systems or client-bank software products to simplify the transaction. This is due to the fact that such operations carry additional risk for banks, therefore, before concluding such transactions, the client must either obtain a special risk sublimit for urgent transactions from the bank, or provide security for the transaction.
What specific conversion operations are encountered in practice?
The most common operations carried out by Russian banks are:
- purchase of foreign currency using client funds placed on a ruble account, followed by crediting the currency to the specified foreign currency account;
- purchase of national currency using client funds placed on a foreign currency account, with subsequent crediting of rubles to the specified foreign currency account;
- carrying out a purchase and sale transaction using funds in one currency with the subsequent crediting of the amount to an account in another currency.
A conversion operation is a transaction carried out by participants in the foreign exchange market to exchange the currency of one state for the monetary unit of another. Moreover, their volumes are agreed upon in advance, as is the exchange rate, with settlements to be made after a certain time. If we consider the concept from a legal point of view, we can conclude that a conversion operation is a transaction for the purchase and sale of currency. In order to denote it, the stable English-language concept Forex or FX is used, which is an abbreviation for the expression Foreign Exchange Operations - “currency exchange operations”.
Conversion transactions differ from traditional credit and deposit transactions in that they are performed at a certain precise point in time. Transactions of the second type have different urgency and time duration.
Types of conversion operations
These operations can be divided into two main types:
- current or spot transactions;
- future or forward transactions.
Spot transactions occupy the largest volume on the market. International practice stipulates that the date of their implementation is the second working day after implementation. These conditions are suitable for the participants in the transaction, since within the given time it is possible to complete payment documents and process the available documentation. The place designated for exchanging currencies based on current quotes is the spot market.
Forward conversion transactions (forward) include:
- forwards;
- futures;
- swaps.
These transactions can also be found under the name “derivatives”. They were specially created for real business. This is due to the fact that they make it possible in the future to reduce changes in quotes on the international foreign exchange market. For those who want to make money using the Internet on Forex, these financial instruments are practically meaningless. At the same time, they should be considered to understand the concept of conversion operations and their types.
Spot market and its participants
The spot market represents the supply of currency. The main participants are banks, which exchange currency on the spot market with partners:
- with client companies directly;
- with commercial banks in the interbank market;
- with banks and clients through brokers;
- with state central banks.
The spot market can serve individual needs and speculative transactions of companies and financial institutions.
Spot market rules
The rules of this market are not fixed in international conventions, but all participants in transactions adhere to them without fail. These include:
- payments must be made no later than two working days and in the amount of the agreed currency without additional establishment of an interest rate;
- most often, transactions are carried out on the basis of computer-type trading, which provides for confirmation on the next business day using electronic notifications;
- the course must be adhered to without fail.
The main instrument of the spot market is an electronic transfer carried out through the channels of the SWIFT system.
Purposes of performing spot conversion operations
Transactions of this type account for about 40 percent of FOREX trading volume. Their main goals can be called:
Execution of conversion-type orders from clients of a financial institution;
Liquidity support, for which banks exchange currencies from one to another using their own funds;
Concluding speculative conversion transactions;
Elimination of the possible presence of uncovered account balances, for which positions are made;
Reducing surpluses in one currency, as well as replacing the need for another.
Forward contracts
A forward conversion transaction is a transaction to exchange currencies at a pre-agreed rate. The value date in this case is postponed for a certain period, which is agreed upon by both parties to the transaction.
Forward contracts are most beneficial if a domestic company plans to purchase goods abroad in US dollars. At the same time, it may not have the required amount of funds to carry out operations at the time of concluding the contract, but is awaiting their receipt. In such a situation, it makes sense to use a forward contract to purchase the required amount of currency with a suitable value date at quotes favorable to the company. This option is acceptable if the exchange rate is expected to change in an unfavorable direction.
Forward contracts can provide benefits and minimize risks, but in some cases they can result in lost profits. Using the example of a domestic company, this means that the currency will not become more expensive, but, on the contrary, cheaper. Thus, the company could pay a smaller amount in rubles for the goods.
Futures and options
A futures conversion transaction is a transaction that has fixed amounts of currency and standard value terms. Thus, such contracts can be traded as securities. The futures market is designed for trading them. The average duration of circulation of these conversion transactions can be called three months.
Options are similar to futures, but the obligations of one of the parties are significantly weakened. You can cancel the transaction at any time if necessary. At the same time, these contracts are traded on a separately designated options market.
Swaps and their features
Swaps are currency conversion transactions that involve entering into a transaction aimed at buying and selling a specified amount of currency. The obligation in this case is to complete a reverse transaction after a certain time. Quite often they represent conversion operations of banks and organizations. They are not subject to generally accepted standards, so there is no separate market for them. Among all financial instruments they have the least value.
Conversion transactions
Conducting conversion operations requires certain preparation, especially risk minimization. A short delivery time does not reduce the risk borne by counterparties in this transaction. This is due to the fact that the exchange rate can change in a short time.
The technique of concluding transactions consists of several stages. First of all, an analysis of the state of foreign exchange markets is carried out, and trends in the movement of exchange rates of specific currencies are determined. In addition, at the preparatory stage it is necessary to study the reasons for their changes. Based on the information received, dealers can take into account the currency position they have. Thus, the exchange rate of the national currency in relation to foreign currency is determined using computer technology.
Conversion operations of banks require limiting potential risk. For this reason, transactions should be carried out with reliable partners. The analysis performed will allow us to develop the direction of currency transactions. This provides a short or long position in the specific currency that is used in the transaction.
In large banks, conversion operations on customer accounts are carried out thanks to special groups of economists and analysts. Dealers take into account their information and independently choose the direction of currency transactions. Smaller banks do not have these specialists and their functions are performed by the dealers themselves.
When making currency conversion transactions, you must have a sufficient amount of knowledge and practical skills, so it is worth studying each of their types in detail.
Organization and procedure for accounting for conversion operations of banks
Introduction
Conversion operations are a source of income for banks. The state of the Russian economy today remains difficult. The crisis in global financial markets, the decline in world oil prices, a large tax shortfall in Russia, the leakage of foreign currency funds abroad, the fall in Russian securities rates, a significant decrease in the country's gold and foreign exchange reserves - all this had a negative impact on the Russian ruble. The instability of the banking system is the basis that supports distrust in the national currency and determines the ever-increasing demand for foreign currency. The increase in Russia's contacts with different countries leads to the fact that domestic enterprises export their goods to their markets and import their goods to our markets. To make payments, enterprises resort to the services of a bank, which carries out non-cash purchase/sale of foreign currency.
Global trade and the movement of money internationally is the basis of foreign exchange transactions.
The bank is an intermediary between the demand and supply of foreign currency. The main task of the bank's foreign exchange department is to provide its clients with the opportunity to convert assets and capital in one currency into another currency. Banks operate in the foreign exchange market by conducting conversion operations.
World trade requires the emergence and development of forward transactions with foreign currency in the case when, when carrying out a commercial transaction, there is a need to insure against currency risk (the risk of changes in the exchange rate). Therefore, such currency transactions as “forward”, “option” and “swap” are widely used for hedging purposes (insurance against currency risks)
Relevance of the topicdue to the fact that the reform of the Russian economy led to the entry of Russian commercial banks into the world foreign exchange market, which were faced with the fact that the unpredictability and instability of exchange rates could have a significant impact on their financial position as a result of conversion transactions.
The purpose of the workis order research accounting of bank conversion operations.
To achieve the goals set within the framework of the work, the following were identified: tasks:
1)study the classification of conversion operations of banks
2)consider the characteristics and procedure for conducting cash and futures transactions;
)determine the procedure for recording transactions when making calculations
Subject of researchare conversion operations.
Object of studyare credit institutions that carry out foreign exchange transactions in terms of the purchase and sale of foreign currency.
The first chapter discusses the classification of conversion transactions, the characteristics and procedure for conducting cash and futures transactions, the essence of forward and futures transactions.
The second chapter reveals the procedure for reflecting transactions in accounting when making calculations
The information base included teaching aids, materials from the Bulletin of the Bank of Russia, magazines, as well as regulations, the Internet, federal laws, guidelines, resolutions and instructions of the Central Bank of the Russian Federation.
1. Classification and characteristics of conversion operations
1.1 Classification of conversion transactions
Conversion operations- transactions of purchase and sale of cash and non-cash foreign currency against cash and non-cash Russian rubles.
Federal Law of December 10, 2003 No. 173-FZ “On Currency Regulation and Currency Control” The purpose of this Federal Law is to ensure the implementation of a unified state monetary policy, as well as the stability of the currency of the Russian Federation and the stability of the domestic foreign exchange market of the Russian Federation as factors for the progressive development of the national economy and international economic cooperation.
All transactions for the purchase and sale of foreign currency are carried out through authorized banks.
Participants in the foreign exchange market are the Central Bank, authorized banks, investment companies and funds, brokerage organizations, branches and representative offices of foreign banks.
Domestic foreign exchange market: currency trading is carried out on the exchange and over-the-counter markets.
The exchange market is represented by exchanges that have the appropriate license.
Exchanges operate on the basis of the charter and the main tasks of their activities are the mobilization of temporarily free funds in rubles and foreign currencies, and the establishment of exchange rates.
The rules for conducting trading are established by the exchange committee, and the trading technique is established by the Central Bank.
The Central Bank determines the types of currencies for which trading is carried out, the maximum size of deviations from the previous rate, requirements for the timing and procedure for making payments under concluded contracts, and the amount of commission.
The exchange foreign exchange market can serve as the MICEX, which was created in 1992 as a closed joint stock company.
Trading participants conduct transactions through their representatives - dealers, who act on the basis of a power of attorney. The conduct of trading and the determination of the current investment rate are determined by a specially authorized employee of the exchange - an exchange rate broker.
Before the start of trading, applications for the purchase or sale of investments are submitted. If the total size of the supply of investments at the beginning of trading exceeds the size of the demand for it, then the exchange rate broker lowers the rate and vice versa.
Types of conversion operations
Type Characteristics Types Cash transaction in which the purchase or sale of currency is carried out no later than two working days from the date of the transaction at the rate fixed at the time of the transaction Trade type "TODAY"- a conversion transaction with a value date on the day the transaction is concluded. Transaction type “TOMORROW-a conversion transaction with a value date on the business banking day following the day the transaction was concluded. SPOT type transaction- conversion transaction with a value date on the second business banking day after the day of conclusion of the transaction. Urgent Transactions of purchase and sale of foreign currency, executed by contracts for a period indicating a specific settlement date more than two working days from the date of conclusion of the transaction. · forward transactions · futures transactions; · option transactions. A forward transaction, the value date of which is more than 2 banking days away from the date of the transaction at the rate determined at the time of the transaction “Outright” transactions- a forward currency exchange transaction, including a premium or discount, in which the exchange rate is set in advance, and the execution of the transaction itself is permissible after a deferred period of time, no less than 2 business days after its conclusion Forward "swaps"- a combination of two “outright” transactions. Futures A forward transaction for the purchase and sale of goods, currency, securities at prices valid at the time of the transaction, with delivery of the purchased goods and its payment in the future Arbitration Transactions between the Bank and the Client for the purchase or sale of non-cash foreign currency of one type for foreign currency of another type (hereinafter referred to as transactions) with settlement on the agreed value date .
The Central Bank can carry out currency and ruble interventions on exchanges in order to maintain a stable exchange rate of the national currency.
The over-the-counter foreign exchange market is represented by commercial banks that enter into agreements with each other for the purchase and sale of foreign currency. These transactions are formalized by contracts, which specify:
participants in the transaction;
transaction currency;
date and time of the transaction;
transaction execution date.
The execution of such currency relations is regulated by the state, which strives to implement its foreign exchange policy aimed at ensuring sustainable development and maintaining balance of payments equilibrium
Cash transaction- a transaction in which the purchase or sale of currency is carried out no later than two business days from the date of conclusion of the transaction at the rate fixed at the time of conclusion of the transaction.
Cash transactions are divided into 3 types:
“TODAY” trades with a value date of today
“TOMORROW” trades with a value date of tomorrow
SPOT transactions with a value date on the second day from the date of the transaction.
Trade type "TODAY"- a conversion transaction with a value date on the day the transaction is concluded.
Transaction type "TOMORROW"- a conversion transaction with a value date on the business banking day following the day the transaction was concluded.
The difference in exchange rates on the date “today” and the date “tomorrow” determines the possibility of receiving additional income.
Under SPOT type transaction- a conversion transaction with a value date on the second business banking day after the day the transaction was concluded.
Cash foreign exchange transactions are carried out mainly on SPOT terms, which implies a two-day period for transferring currencies after the transaction is concluded at the rate fixed at the time of its conclusion. This allows you to transfer funds to any country and complete the transaction. The basis for conducting SPOT is correspondent relations between banks.
Their essence lies in the purchase and sale of currency on the terms of its delivery by counterparty banks on the second business day from the date of conclusion of the transaction at the rate fixed at the time of its conclusion. In this case, working days are counted for each of the currencies involved in the transaction, i.e. if the next day after the transaction date is a non-working day for one currency, the delivery time for currencies is increased by 1 day, but if the subsequent day is a non-working day for another currency, the delivery time is increased by another 1 day.
Banks use SPOT transactions to maintain minimum required working balances with foreign banks in nostro accounts in order to reduce surpluses in one currency and cover requirements for another currency. With the help of this, banks regulate their currency position in order to avoid the formation of uncovered account balances. Despite the short delivery time of foreign currency, counterparties bear the currency risk for this transaction, since under the conditions of “floating” exchange rates the rate can change within two business days.
Futures transactions- transactions of purchase and sale of foreign currency, executed by contracts for a period indicating a specific settlement date more than two working days from the date of conclusion of the transaction.
A long period of time between the moment a transaction is concluded and its execution. Formally, this period should exceed 2 working days, but in reality it is at least 30 working days. Quite typical are deadlines at 30,60,90,180 days;
At the time of concluding the contract, the parties do not necessarily have the asset (currency). Moreover, there are types of forward transactions, where the parties stipulate in advance the execution of the transaction without the purchase or sale of currency. The main purpose of forward currency transactions is as follows:
receipt of the required currency by the time the main foreign economic contract is executed contract (trade, financial);
foreign exchange speculation and arbitrage;
protection against currency risks, called hedging.
This is especially important for long-term transactions, since as the term increases, the potential risk of changes in the exchange rate increases.
The main types of forward currency transactions are:
· forward transactions
· futures transactions;
· option transactions.
Forward transaction- a transaction for which the value date is more than 2 banking business days away from the date of the transaction at the rate determined at the time of the transaction.
Forward transactions are divided into 2 types:
. “Outright” transactions- a forward currency exchange transaction, including a premium or discount, in which the exchange rate is set in advance, and the execution of the transaction itself is permissible after a deferred period of time, no less than 2 business days after its conclusion.
In an outright transaction, both parties are obliged to fulfill the contract. Such transactions are carried out on the over-the-counter market. The parties to the contract are usually either two commercial banks or a commercial bank and a client.
. Forward "swaps"- a combination of two outright transactions.
There are two options for executing a forward foreign exchange contract:
· by actual delivery of the currency being sold (delivery forward);
· by the losing party paying the difference between the forward rate and the current rate at the time the contract is executed (settled forward).
With a deliverable forward, the seller of the currency must actually sell it, regardless of how he himself acquires this currency. If the seller does not have the currency at the time of execution of the forward contract, he will be forced to buy it on the spot market at the prevailing current rate. With a settlement forward, there is no actual delivery of currency, but only payment of the specified difference in currency is made either to the seller or to the buyer.
Futures deal- urgent transaction of purchase and sale of goods, currency, securities at prices valid at the time of the transaction, with delivery of the purchased goods and payment in the future.
In futures trading, the interaction between representatives of the buyer and seller is carried out through the exchange; When concluding a contract, they must accept the price established as a result of the trading session (if this price meets the application of the seller or buyer).
The futures contract itself represents the broker's obligation to the Clearing House to sell or buy currency in the future. The positions of the parties under the futures contract are recalculated daily.
Before the start of the contract execution period, each party can close its position by making a reverse (offset) transaction at the price that currently exists for the corresponding type of contract. In this case, the Exchange Clearing House returns the initial insurance premium to the participant.
It is better to ensure the supply of currency in the required amount and on time through forward contracts with commercial banks. However, it is necessary to take into account the low liquidity of forward contracts.
Arbitration operations- transactions between the Bank and the Client for the purchase or sale of non-cash foreign currency of one type for foreign currency of another type (hereinafter referred to as transactions) calculated on the agreed value date. These operations involve the implementation of at least two opposite transactions for the purchase and sale of currencies for the same amount
1.2 Analysis of the development of conversion operations
Foreign currency trading has become a common activity both in global foreign exchange markets and in the Russian foreign exchange market.
The share of Russian participation in the global foreign exchange market is small. The average annual volume of transactions in 2011 was at the level of $50 billion, accounting for 1.3% of the global foreign exchange market. In spot transactions, the role of the Russian market is much higher: it accounts for more than 3% of global turnover, and in forward transactions and currency swaps, the share of Russian operations is less than 1% of global turnover. Despite the low specific indicators, it is necessary to note the steady growth in the share of Russian participation. Compared to Forex, the pace of the Russian foreign exchange market is higher. The increase in investor interest in Russian assets was facilitated by:
liberalization of foreign exchange regulations;
development of the Russian stock market;
rising oil prices and strengthening of the ruble.
According to the Bank of Russia, the average annual turnover of interbank cash conversion transactions over the past 3 years has increased 3.1 times: up to $98 billion in 2010. The Russian exchange market grew at an even faster rate: the average annual turnover of the foreign exchange market of the Moscow Interbank Currency Exchange (MICEX) during this time increased 4.3 times, exceeding $7.9 billion in 2010.
Changes in the structure of the Russian foreign exchange market are taking place in accordance with global trends. Currency proportions are increasingly determined not so much by the flow of export earnings, but by the movement of international capital, the liquidity of the financial system, and the development of legislation.
In accordance with global market trends, the share of direct conversion spot transactions in the Russian interbank market over 4 years decreased to 62.1% due to the growth of the “money” and “insurance” segments (swap transactions and forward currency transactions).
On the exchange market, these processes also proceeded intensively: the share of cash transactions decreased from 60.6% on average in 2009 to 57.9% in 2010.
Structure of foreign exchange market turnover by type of transaction, %
Type of operations World foreign exchange market Russian foreign exchange market MICEX foreign exchange market 2009 2010 2011 Spot operations 3362,160,656,557,9 Currency swaps 5635,236,138,135,8 Forwards and futures 122,73,35,46,3
Since May 2011, the banking system has been experiencing a liquidity crisis, which has significantly affected the structure of foreign exchange transactions. A sharp increase in interbank credit market rates led to an increase in the need for refinancing operations. After a long break, in August-September swap transactions were concluded with the Bank of Russia for a total amount of $7.6 billion. As a result, the share of swap transactions on the MICEX foreign exchange market increased to 40-42%.
The growing volatility of the rates of major currencies, the formation of the regulatory framework of the derivatives market and the attraction of new participants contributed to the further growth of the share of currency futures, which reached 6.3% of the MICEX foreign exchange turnover in 2011, but still lags behind the 12% global average.
The world economy has entered a very difficult economic period. At the center of this global crisis is the American financial system. The reason was innovations in the field of mortgage lending.
2. The procedure for accounting for conversion transactions of banks
2.1 Balance sheet and off-balance sheet accounts
Accounts for accounting for conversion transactions are given from Regulation 302-p
Balance sheet accounts and off-balance sheet accounts Account attribute Account name 47407 Settlements for conversion transactions and forward transactions. Analytical accounting - for each client by type of currency. The Head Bank maintains consolidated accounts in the Athena IBS by type of currency, and analytical accounts for clients are maintained in a separate program. 47408AR settlements for conversion transactions and forward transactions. Analytical accounting - for each client by type of currency. The Head Bank maintains consolidated accounts in the Athena IBS by type of currency; analytical accounts for clients are maintained in a separate program. 47422Bank's obligations for other operations 1. Technical personal account “Position” - for the Head Bank. 2. Personal account “Customer funds for the purchase / sale of foreign currency received before the date of the transaction.” The Head Bank - IBS "Athena" maintains consolidated accounts by structural divisions. In the bank branches - in the IBS, analytical accounting is maintained for each client. 61306P Revaluation of funds in foreign currency - positive differences 61406 A Revaluation of funds in foreign currency - negative differences 930AT Requirements for the supply of funds. Analytical accounting - for each contract by type of currency. 933 Requirements for the supply of funds. 2nd order accounts are determined depending on the deadlines for fulfilling the requirements. Analytical accounting - for each agreement by type of currency. 93801AN unrealized exchange rate differences (negative) on the revaluation of foreign currency (a technical personal account “Position” is also opened at the Head Bank in the specified account). 960PO Obligations for the supply of funds. Analytical accounting - for each agreement by type of currency. 963 Obligations for the supply of funds. 2nd order accounts are determined depending on the timing of obligations. Analytical accounting - for each agreement by type of currency. 96801П Unrealized exchange rate differences (positive) on the revaluation of foreign currency (a technical personal account “Position” is also opened in the Head Bank on the specified account).
.2 The procedure for recording transactions when making calculations
conversion transaction currency operation
A concluded transaction for the purchase of US dollars from a client is reflected in the client’s personal accounts opened on balance sheet accounts 47407 And 47408 in the following way:
D 47408“Settlements for conversion transactions and urgent transactions” - for the amount of claims in foreign currency (in rubles at the rate of the Central Bank of the Russian Federation)
K 47407“Settlements for conversion transactions and forward transactions” - for the amount of obligations in rubles (at the purchase rate),
K 70103“Income received from transactions with foreign currency and other currency values” - by the amount of the operating exchange rate difference.
Satisfaction of requirements in foreign currency occurs by debiting it from the client’s current foreign currency account (according to the corresponding personal account):
D 40702
K 47408“Settlements for conversion transactions and operations” - for the amount of claims in foreign currency. Fulfillment of obligations under the transaction occurs by crediting the rubles sold to the client to his current account (according to the corresponding personal account):
D 47407
K 40702“Commercial enterprises and organizations” - for the amount of liabilities in rubles.
No commission should be charged from the client for such transactions, since these are not intermediary transactions, they are carried out by the bank at its own expense (by maintaining an open currency position). If the bank provides for charging a commission, then it must include VAT.
Sale of foreign currency to the client at his own expense. In accordance with the instruction of the Central Bank of the Russian Federation dated June 29, 1992 No. 7 “On the procedure for the mandatory sale by enterprises, institutions, organizations of part of foreign exchange earnings through authorized banks and conducting operations on the domestic foreign exchange market of the Russian Federation” with subsequent amendments and valid to the extent that does not contradict instructions No. 383-U and 409-U, an authorized bank can accept an application from a client to purchase foreign currency from a bank only if there are documents confirming that this currency is necessary for it to carry out a current currency transaction or an operation related to the movement of capital, if available the client has a license from the Central Bank of the Russian Federation to carry out such an operation.
A concluded transaction for the sale of US dollars to a client is reflected as follows:
D 47408“Settlements for conversion transactions and urgent transactions” - for the amount of claims in rubles
K 47407
K 70103“Income received from transactions with foreign currency and other currency values” - in the amount of the operating exchange rate difference.
Satisfaction of the requirements for the transaction occurs by writing off the ruble coverage at the selling rate from the client’s current account (from the corresponding personal account):
D 40702"Commercial enterprises and organizations"
K 47408
Fulfillment of obligations under a transaction in foreign currency occurs by crediting it to the client’s special transit currency account (in accordance with the requirements of Directive No. 383-U):
D 47407“Settlements for conversion transactions and forward transactions”
K 40702“Commercial enterprises and organizations” - for the amount of liabilities in foreign currency.
If a bank acts as a client, then such transactions will be reflected in the accounting by similar entries, but instead of the client’s current account, they will indicate the bank’s correspondent account in the RCC (30102810), and instead of the client’s special transit currency account, a correspondent account with the bank will appear. correspondent in foreign currency (30110840).
Transactions on the currency exchange at your own expense. Transactions in the purchase and sale of foreign currency by banks on the stock exchange (MICEX) with settlements on the same day ("today" transactions) are carried out on the basis of preliminary deposit of funds (intended for the sale of foreign currency or ruble coverage necessary for the purchase of foreign currency). The question of which balance account to reflect the funds transferred by the bank to the stock exchange to ensure settlements at the bank’s request remains unclear. Since operations carried out at trading sessions of interbank currency exchanges, including special trading sessions, relate to operations on the organized securities market (OSM) in the sector for settlements on the foreign exchange market, it would be logical to use balance sheet account 304 to account for these operations "Settlements on ORTSB". At the same time, the Department of Accounting and Reporting of the Central Bank of the Russian Federation, in a letter dated November 13, 1998 No. 18-2-6/1729, explained the procedure for reflecting in the accounting accounts the movement of funds sent to the MICEX for the purchase or sale of currency, as follows: Since the MICEX does not open currency accounts for credit organizations on balance sheet account 304, credit organizations do not have the right to reflect settlements with the MICEX for the purchase and sale of currency on this balance sheet account. Based on this, to account for payment turnover with currency exchanges, it is recommended to use balance sheet accounts 47403, 47404 “Settlements with currency and stock exchanges” (these accounts, we remind you, work in paired accounts mode). It is difficult to agree with such a recommendation from the Department, since the characteristics of these accounts indicate their purpose - accounting for settlements with exchanges on behalf of clients for the purchase or sale of foreign currency.
At the same time, the credit of passive account 47403 reflects the amounts due in favor of the exchanges for the currency exchange operations they perform, in correspondence with the expense account, i.e. Only the accrual of client commission is reflected. In our opinion, for these purposes it would be advisable to use two paired accounts: active - 47423 “Bank claims for other operations” and passive - 47422 “Bank's obligations for other operations”, on which personal accounts “Settlements with currency exchanges” are opened by type of currency.
Crediting of purchased currency or rubles for sold currency is made by the exchange on the day of trading. On the morning of the next day, banks, having received statements from their correspondent account in the RCC or a correspondent account in a correspondent bank and an exchange certificate for the executed transaction, reflect the receipt of funds in the correspondent account according to the date of the statement, i.e. the previous day, thereby closing the transaction on one trading day. Since foreign currency intended for sale or ruble coverage necessary for the purchase of foreign currency are transferred to the exchange on the eve of trading, some banks try to reflect this transaction in off-balance sheet accounts on the day the advance is transferred to the exchange, i.e. on the day preceding the auction. This is impossible to do, since the transaction has not yet been concluded, the exchange rate, the amount of funds exchanged and other terms of the transaction have not yet been determined.
Let's look at the procedure for reflecting these operations in accounting using an example (the conditions are given above).
Purchasing currency on the exchange at your own expense. According to clause 4.2 of the Regulations of the Central Bank of the Russian Federation dated September 28, 1998 No. 57-P “On the procedure and conditions for trading in US dollars for Russian rubles at special trading sessions of interbank currency exchanges,” authorized banks can buy US dollars at special trading sessions on the MICEX from in its own name and at its own expense for the purpose of making payments in foreign currency to individuals (residents and non-residents) on deposits (accounts) opened with authorized banks. These transactions are reflected in accounting in the same manner as transactions carried out during regular trading sessions.
On the day preceding trading, the bank transfers ruble coverage to the exchange for the purchase of foreign currency:
D 47423
K 30102“Correspondent accounts of credit institutions with the Bank of Russia” - for the deposited amount in rubles at the exchange rate
On the day of trading and the purchased foreign currency is credited to the Nostro correspondent account minus the commission retained by the exchange in foreign currency, the concluded transaction is reflected in personal accounts opened for each transaction on balance sheet accounts 47407 - 47408 :
D 47408“Settlements for conversion transactions and urgent transactions” - for the amount of claims in foreign currency (at the rate of the Central Bank of the Russian Federation),
D 70205“Expenses on transactions with foreign currency and other currency values - in the amount of operating exchange rate differences
K 47407“Settlements for conversion transactions and forward transactions” - for the amount of obligations in rubles (at the exchange rate).
Fulfillment of obligations under the transaction occurs by offsetting the amount of prepayment to the exchange in rubles:
D 47407“Settlements for conversion transactions and forward transactions”
K 47423“Bank claims for other operations” - for the amount of liabilities in rubles.
The requirements for the transaction are satisfied when the purchased currency is credited to the Nostro correspondent account minus the withheld commission:
D 30110“Correspondent accounts with correspondent credit institutions” - for the amount of purchased currency minus commission,
D 70205“Expenses on transactions with foreign currency and other currency values - in the amount of the ruble equivalent of the exchange commission withheld in foreign currency
K 47408“Reserves for possible losses” - for the amount of claims in foreign currency (at the rate of the Central Bank of the Russian Federation).
Since the commission withheld in foreign currency is charged to the bank’s expenses in rubles at the rate of the Central Bank of the Russian Federation, this will be reflected in the foreign exchange position as the sale of one US dollar. Thus, the actual amount of $999 received in the currency correspondent account will be reflected in the currency position as a purchase of $1,000 and a sale of $1 at the same time.
Selling currency on the exchange at your own expense. According to clause 4.1 of Regulation No. 57-P, authorized banks can sell US dollars at special trading sessions on the MICEX on their own behalf and at their own expense. These transactions are reflected in accounting in the same manner as transactions carried out during regular trading sessions.
On the day preceding trading, the bank transfers to the exchange the amount of foreign currency intended for sale:
D 47423“Bank claims for other operations” - for the personal account “Settlements with the currency exchange”
K 30110“Correspondent accounts with correspondent credit institutions” - for the deposited amount in foreign currency and ruble equivalent at the rate of the Central Bank of the Russian Federation.
On the day of trading and crediting of rubles for sold foreign currency to the correspondent account in the RCC, the concluded transaction is reflected in personal accounts opened for each transaction on balance sheet accounts 47407 - 47408 :
D 47408“Settlements for conversion transactions and forward transactions” - for the amount of claims in rubles (at the exchange rate)
K 47407“Settlements for conversion transactions and urgent transactions” - for the amount of obligations in foreign currency (in rubles at the rate of the Central Bank of the Russian Federation)
K 70103“Income received from transactions with foreign currency and other currency values” - for the amount of the operating exchange rate difference, i.e. the excess of the amount of claims in rubles at the exchange rate (ruble coverage) over the amount of liabilities in foreign currency expressed in rubles at the official exchange rate of the Central Bank of the Russian Federation.
Fulfillment of obligations under the transaction occurs by offsetting the amount of prepayment to the exchange in foreign currency:
D 47407“Settlements for conversion transactions and forward transactions”
K 47423“Bank's claims for other operations” - for the amount of liabilities in foreign currency.
The requirements for the transaction are satisfied when rubles are credited for the foreign currency sold minus the exchange commission:
D 30102"Correspondent accounts of credit organizations in the Bank of Russia" - for the amount of rubles received minus commission,
D 70205“Expenses on transactions with foreign currency and other currency values” - in the amount of commission retained by the exchange in rubles
K 47408“Settlements for conversion transactions and urgent transactions” - for the amount of claims in rubles.
Conclusion
Based on the conducted research, the following conclusions can be drawn.
Conversion operations mean bank operations related to conversion, i.e. with the exchange of one currency for another. This exchange is carried out by concluding transactions for the purchase and sale of foreign currency (both cash and non-cash). The delivery of funds (value date) for these transactions can be carried out immediately (no later than the second banking day from the date of the transaction) or after a certain period of time (more than two working banking days from the date of the transaction).
The date of the transaction (transaction date) is the date the parties to the transaction reach an agreement on all its essential terms (name of the currencies exchanged, exchange rate, amounts of funds exchanged, value date, payment instruments) and all other conditions regarding which, at the request of one of the parties, there must be an agreement has been reached.
Conversion transactions are subject to government and banking supervision and control. In countries with a partially convertible currency and restrictions on financial transactions, the size of the banks' foreign exchange position relative to the national currency serves as one of the objects of foreign exchange control.
Bibliography
1. Federal Law of December 10, 2003 No. 173-FZ “On Currency Regulation and Currency Control”
Directive of the Bank of Russia dated March 30, 1998 No. 199-u “On establishing a unified procedure for determining cash (cash) and futures transactions of credit institutions and introducing amendments and additions to the regulations of the Bank of Russia”
Regulations on the rules of accounting in credit institutions located on the territory of the Russian Federation No. 302-P dated March 26, 2007.
Bank of Russia Regulation No. 77-P dated September 16, 1999 “On the procedure and conditions for trading foreign currencies for Russian rubles at a single trading session of interbank currency exchanges”
Bank of Russia Instruction No. 124-I dated March 30, 2005 “On establishing the size (limits) of open currency positions, the methodology for their calculation and the specifics of supervising their compliance by credit institutions”
Bank of Russia Instruction No. 111-i “On the mandatory sale of part of foreign currency earnings on the domestic foreign exchange market of the Russian Federation”
Textbook Banking (Ed. O.I. Lavrushin. - 2nd ed., revised and expanded) Moscow 2002.
Banking. Textbook edited by G.N. Beloglazova L.P. Krolivetskaya, M. Ed. "Finance and Statistics", 2003
Another country at an agreed rate with settlements carried out on a specific date.
In a legal sense, conversion transactions are transactions for the purchase and sale of currencies. In relation to conversion operations, the English language has adopted the stable term Foreign Exchange Operations (Forex or FX for short).
The main difference between conversion operations and credit-deposit operations is that the former do not extend in time, that is, they are carried out at a certain point in time, while deposit operations have a duration in time and different urgency.
By timing conversion operations are divided into two groups:
1. Spot operations, or current conversion operations;
2. Forward or urgent conversion operations.
In world practice it is accepted that current conversion operations for major world currency pairs are carried out on spot terms, that is, with a value date on the 2nd business day after the day the transaction was concluded. The international market for current conversion transactions is called the spot market. The terms of spot settlements are quite convenient for the counterparties of the transaction: during the current and next day after its conclusion, it is convenient to process the necessary documentation and issue payment orders for making transfers. In Russia, as well as in a number of developing countries, a different practice has developed for conducting settlements on conversion transactions. Current (or the term cash) transactions on the dollar/ruble market are concluded with a value date of “today”, “tomorrow” and only occasionally on spot. Transactions with a value date today can be concluded throughout the business day, since until late it is possible to make non-cash transfers in dollars (in the USA, due to the eight-hour time difference, the cutoff time is late evening in Moscow) and in rubles (due to the fact that Settlement -cash centers (RCCs) of the Central Bank of the Russian Federation accept payment orders until 21:00 Moscow time).
Forward (urgent) conversion operations(FX forward operations or FWD for short) are currency exchange transactions at a pre-agreed rate that are concluded today, but the value date (that is, the execution of the contract) is postponed for a certain period in the future.
Forward transactions are divided into two types:
1. Outright transactions- a single conversion transaction with a value date different from the spot date. They account for about 17% of futures transactions;
2. Currency swap transactions(FX swap) - they make up 83%, that is, the majority of forward transactions.
Literature
- D. Yu. Piskulov. Theory and practice of currency dealing. Educational edition.
Wikimedia Foundation. 2010.
See what “Conversion operations” are in other dictionaries:
Operations related to the conversion of one security into another. See also: Banking operations Exchange stock operations Convertible securities Financial Dictionary Finam ... Financial Dictionary
CONVERSION OPERATIONS- 1) exchange (purchase and sale) of currencies; carried out by banks and other credit and financial institutions, commercial and industrial corporations, individuals through the mediation of the foreign exchange market (transactions between banks and clients and interbank transactions), as well as ... Legal encyclopedia
1) exchange (purchase and sale) of currencies; carried out by banks and other credit and financial institutions, commercial and industrial corporations, individuals through the mediation of the foreign exchange market (transactions between banks and clients and interbank transactions), etc.... Encyclopedic Dictionary of Economics and Law
CONVERSION OPERATIONS- currency transactions, exchange (purchase and sale) of currencies; carried out by banks, other financial institutions, trading and industrial companies, and individuals at foreign exchange market rates. Banks carry out Co. when making your calculations... Foreign economic explanatory dictionary
conversion operations- exchange and purchase and sale of currencies carried out by banks, commercial and industrial corporations, individuals... Dictionary of economic terms- operations related to the conversion of one security into another. For example, operations to convert short-term liabilities into long-term... Legal dictionary
Transactions for the purchase and sale of cash and non-cash foreign currency for cash and non-cash rubles. Dictionary of business terms. Akademik.ru. 2001 ... Dictionary of business terms
conversion transaction currency
Conversion transactions are transactions for the purchase and sale of cash and non-cash foreign currency against cash and non-cash Russian rubles.
Federal Law of December 10, 2003 No. 173-FZ “On Currency Regulation and Currency Control” The purpose of this Federal Law is to ensure the implementation of a unified state monetary policy, as well as the stability of the currency of the Russian Federation and the stability of the domestic foreign exchange market of the Russian Federation as factors for the progressive development of the national economy and international economic cooperation.
All transactions for the purchase and sale of foreign currency are carried out through authorized banks.
Participants in the foreign exchange market are the Central Bank, authorized banks, investment companies and funds, brokerage organizations, branches and representative offices of foreign banks.
Domestic foreign exchange market: currency trading is carried out on the exchange and over-the-counter markets.
The exchange market is represented by exchanges that have the appropriate license.
Exchanges operate on the basis of the charter and the main tasks of their activities are the mobilization of temporarily free funds in rubles and foreign currencies, and the establishment of exchange rates.
The rules for conducting trading are established by the exchange committee, and the trading technique is established by the Central Bank.
The Central Bank determines the types of currencies for which trading is carried out, the maximum size of deviations from the previous rate, requirements for the timing and procedure for making payments under concluded contracts, and the amount of commission.
The exchange foreign exchange market can serve as the MICEX, which was created in 1992 as a closed joint stock company.
Trading participants conduct transactions through their representatives - dealers, who act on the basis of a power of attorney. The conduct of trading and the determination of the current investment rate are determined by a specially authorized employee of the exchange - an exchange rate broker.
Before the start of trading, applications for the purchase or sale of investments are submitted. If the total size of the supply of investments at the beginning of trading exceeds the size of the demand for it, then the exchange rate broker lowers the rate and vice versa.
The Central Bank can carry out currency and ruble interventions on exchanges in order to maintain a stable exchange rate of the national currency.
The over-the-counter foreign exchange market is represented by commercial banks that enter into agreements with each other for the purchase and sale of foreign currency. These transactions are formalized by contracts, which specify:
- - participants in the transaction;
- - transaction currency;
- - date and time of the transaction;
- - date of execution of the transaction.
The execution of such currency relations is regulated by the state, which strives to implement its foreign exchange policy aimed at ensuring sustainable development and maintaining balance of payments equilibrium
Cash transaction - a transaction in which the purchase or sale of currency is carried out no later than two business days from the date of conclusion of the transaction at the rate fixed at the time of conclusion of the transaction.
Cash transactions are divided into 3 types:
- 1. TODAY trades with a value date of today
- 2. “TOMORROW” trades with a value date of tomorrow
- 3. SPOT transactions with a value date on the second day from the date of the transaction.
A “TODAY” type transaction is a conversion transaction with a value date on the day the transaction is concluded.
A “TOMORROW” type transaction is a conversion operation with a value date on the business banking day following the day the transaction was concluded.
The difference in exchange rates on the date “today” and the date “tomorrow” determines the possibility of receiving additional income.
A “SPOT” type transaction is a conversion transaction with a value date on the second business banking day after the day the transaction was concluded.
Cash foreign exchange transactions are carried out mainly on SPOT terms, which implies a two-day period for transferring currencies after the transaction is concluded at the rate fixed at the time of its conclusion. This allows you to transfer funds to any country and complete the transaction. The basis for conducting SPOT is correspondent relations between banks.
Their essence lies in the purchase and sale of currency on the terms of its delivery by counterparty banks on the second business day from the date of conclusion of the transaction at the rate fixed at the time of its conclusion. In this case, working days are counted for each of the currencies involved in the transaction, i.e. if the next day after the transaction date is a non-working day for one currency, the delivery time for currencies is increased by 1 day, but if the subsequent day is a non-working day for another currency, the delivery time is increased by another 1 day.
Banks use SPOT transactions to maintain minimum required working balances with foreign banks in nostro accounts in order to reduce surpluses in one currency and cover requirements for another currency. With the help of this, banks regulate their currency position in order to avoid the formation of uncovered account balances. Despite the short delivery time of foreign currency, counterparties bear the currency risk for this transaction, since under the conditions of “floating” exchange rates the rate can change within two business days.
Futures transactions are transactions for the purchase and sale of foreign currency, concluded in contracts for a period indicating a specific settlement date more than two business days from the date of conclusion of the transaction.
- 1. a long period of time between the moment of concluding a transaction and its execution. Formally, this period should exceed 2 working days, but in reality it is at least 30 working days. Fairly typical periods are 30, 60,90,180 days;
- 2. at the time of concluding the contract, the parties do not necessarily have the asset (currency). Moreover, there are types of forward transactions, where the parties stipulate in advance the execution of the transaction without the purchase or sale of currency. The main purpose of forward currency transactions is as follows:
- - receipt of the required currency by the time the main foreign economic contract (trade, financial) is executed;
- - currency speculation and arbitrage;
- - protection against currency risks, called hedging.
This is especially important for long-term transactions, since as the term increases, the potential risk of changes in the exchange rate increases.
The main types of forward currency transactions are:
- forward transactions
- · futures transactions;
- · option transactions.
A forward transaction is a transaction for which the value date is more than 2 banking business days away from the date of the transaction at the rate determined at the time of the transaction.
Forward transactions are divided into 2 types:
1. “Outright” transactions - a forward currency exchange transaction, including a premium or discount, in which the exchange rate is set in advance, and the execution of the operation itself is permissible after a deferred period of time, no less than 2 business days after its conclusion.
In an outright transaction, both parties are obliged to fulfill the contract. Such transactions are carried out on the over-the-counter market. The parties to the contract are usually either two commercial banks or a commercial bank and a client.
2. Forward “SWAPS” - a combination of two “outright” transactions.
There are two options for executing a forward foreign exchange contract:
- - by actual delivery of the currency being sold (delivery forward);
- - by paying the losing party the difference between the forward rate and the current rate at the time of execution of the contract (settled forward).
With a deliverable forward, the seller of the currency must actually sell it, regardless of how he himself acquires this currency. If the seller does not have the currency at the time of execution of the forward contract, he will be forced to buy it on the spot market at the prevailing current rate. With a settlement forward, there is no actual delivery of currency, but only payment of the specified difference in currency is made either to the seller or to the buyer.
Futures transaction is a forward transaction for the purchase and sale of goods, currency, securities at prices valid at the time of the transaction, with delivery of the purchased goods and its payment in the future.
In futures trading, the interaction between representatives of the buyer and seller is carried out through the exchange; When concluding a contract, they must accept the price established as a result of the trading session (if this price meets the application of the seller or buyer).
The futures contract itself represents the broker's obligation to the Clearing House to sell or buy currency in the future. The positions of the parties under the futures contract are recalculated daily.
Before the start of the contract execution period, each party can close its position by making a reverse (offset) transaction at the price that currently exists for the corresponding type of contract. In this case, the Exchange Clearing House returns the initial insurance premium to the participant.
It is better to ensure the supply of currency in the required amount and on time through forward contracts with commercial banks. However, it is necessary to take into account the low liquidity of forward contracts.
Arbitration transactions are transactions between the Bank and the Client for the purchase or sale of non-cash foreign currency of one type for foreign currency of another type (hereinafter referred to as transactions) with settlement on the agreed value date. These operations involve the implementation of at least two opposite transactions for the purchase and sale of currencies for the same amount
