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Industrial & Commercial Bank of China?RMB FORWARD(英文版 )
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| 文章出处：学生大 发布时间：2005-10-11 |
I. What Is RMB FORWARD?
RMB FORWARD is a forex forward deal between RMB and foreign currencies according to a contract signed between customers and ICBC. This contract includes essential details such as currency; amount; forward exchange rate and tenor.
II. Essential RMB FORWARD Terms For Customers:
1. All enterprises and non-profit organizations set in People’s Republic of China;
2. RMB FORWARD should be done according to real background such as:
(A) Receipts and payments under trade accounts;
(B) Receipts and payments under non-trade accounts;
(C) Returning loans dominated by foreign currencies;
(D) Returning loans dominated by foreign currencies and registered in SAFE
(E) Other Receipts and payments authorized by SAFE
III. Edges Brought By RMB FORWARD
Since RMB FORWARD can assure the forward exchange rate in the future, the customers who have future receipts and payments dominated by foreign currencies can control the exchange rate risk and hedge the value of their money.
For instance:
One company will receive USD10, 000,000.00 six months later when the spot exchange rate is 826.47/828.95. If the company wants to control the risk that RMB goes bullish, it can fix the six-months-later exchange rate through RMB FORWARD with ICBC. If ICBC quote 828.84/832.99 for six-months forward exchange rate, the company will be able to sell USD10,000,000.00 to ICBC at 828.84, that is to buy RMB82,884,000.00, after signing a RMB forward contract. When the contract is signed, the customer can sell USD at 828.84 no matter how the six–months-later spot exchange goes. So, we can conclude that RMB forward can bring the edges of hedging the value of the money of our customers.
The forward exchange rate is calculated in usual ways that are adopted in international forward exchange market. The spot exchanged rate, interest rate of RMB and USD, and the tenor are used as main factors. The currency with higher interest rate d
epreciates while the currency with lower interest rate appreciates. In the example cited above, the interest rate of RMB is higher than that of USD, so the forward exchange rate is higher than spot exchange rate. If we predict that the RMB exchange rate will not go up substantially, our customers can fix the exchange cost by RMB FOWARD. On the other side, if the customer will get payment dominated by USD and is worried about the depreciation of USD, he can fix the exchange rate to sell USD through RMB FORWARD deal.
IV. Currencies And Tenor Of RMB FORWARD
The currencies in RMB FORWARD are RMB against USD, HKD，EUR, JPY, GBP, CHF,AUD and other freely convertible currencies.
Customers can use fixed tenor including 7days, 20days, 1month，2month to 12months or choose a certain date to conduct the deal.
Unfixed tenor is decided by the start date and the end date chosen by customers. The start date and the end date must be chosen according to the fixed tenors mentioned above and must be consistent with one of them.
V. Does RMB FORWARD Charge Any Additional Fees?
ICBC charges no additional fees on RMB FORWARD.
VI. Steps To Apply For RMB FORWARD
Every time customers need to do RMB FORWARD, they should apply to ICBC and sign an < RMB FORWARD AGREEMENT>.
1. Our customers need to fill 2 < RMB FORWARD PROXY>s, one for our client, and one for ICBC. At the same time, customers should submit all essential and effective warrant which will be checked by ICBC. The amount is not allowed to be over that has anticipated in the contract and the tenor the same.
2. After confirming the effectiveness of the proxy of our customers, ICBC will charge a sum of margin no less than 3% of the transaction amount or take other risk control procedures; ICBC will write a < RMB FORWARD COMFIRMATION LETTER> to clients.
VII. The Settlement OF FORWARD RMB
The settlement date is decided in < FORWARD RMB PROXY>. When the settlement date arrives, ICBC set
tles with customers under relative regulations after checking their effective warrants and commercial bills.
Due to the complexity of trade and other uncertainties that delay the settlement dates, ICBC gives fixed-tenor-customers another three days for extension. Those customers who have selected unfixed tenor can apply for settlement at any time within the tenor but without any extension.
No settlement will be done unless customers can afford all effective warrants.
VIII. How To Use The Extended Settlement Of RMB FORWARD?
Our customers can apply for extended settlement because of delayed bills or other acceptable reasons, but customers must submit application letter of extended settlement and new before 10:00am of the settlement date. After ICBC accepts customers’ application, customers have to cover former contract before starting a new RMB FORWARD contract. Extended settlement is also applicable in extension period.
Customers will get profit or loss in extended settlement after they cover former contracts at spot exchange rate. If the difference between contract exchange rate and spot exchange rate is negative, customer must add enough margin to apply for extended settlement; if positive, the profit will be added into margin accounts before the contract is done.
We continue the former example and assume that the customer cannot exercise the contract when the obligation is due, and he wants to apply for six-month extended settlement. We also assume that the spot bid/ask prices are 826.34/828.82 and six-month forward bid/ask prices are 828.75 /832.90. The customer buys USD10, 000,000.00 at 828.82 to cover former forward deal. So, the customer get a profit of 100,000×(828.84-828.82)=RMB2, 000.00. Then, the customer applies for a six-month extended settlement (at 828.75). At last, the customer can not only settle with ICBC at 828.75 but also get a profit of RMB 2,000.
IX. Terms Of Default
ICBC has the right to charge customers losses
caused by the following reasons:
1. Customer has not submit all essential and effective warrants and bills before the settlement date;
2. The real tenor and amount of receipt and payment dominated by foreign currencies does not consist with those agreed in contract.
十、Point for Attention
Application for settlement before the settlement date is not accepted in RMB Forward.
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