Why Pay More to Your Bank?
Your goal: lower your company’s costs (or find alternative suppliers that are less expensive, yet reliable and creditworthy).
Your bank's goal: maximize its return by charging fees (many of which are hidden) to clients.
You need knowledge and expertise to reconcile these competing goals. That’s where FXConsulting can help.
Why do companies use their bank to manage foreign currency?
Banks are relatively easy to use for foreign currency transactions and the banks build any forex credit requirements into existing credit agreements. You don’t have to worry about educating yourself on the forex trading market (spreads, pairs, pair orders, swap agreements, and so on) because the bank will take care of all of this for you. Sounds great, but beware. Banks make money on your forex transactions.
Banks use spreads, commissions, and premiums to make money on foreign currency trading and hedging. They offer a variety of hedging products, including Forwards, Futures, Options, Spot Trading, Carry Spot Trades, and other exotic forex products. In all these cases, they can take advantage of their central position to extract as much money as possible from each and every transaction.
How FXConsulting can help
Knowledge brings power. With increased knowledge, you will be in a position to negotiate better deals with your bank or even find an alternative supplier. To get the best deal, you need to devise competitive forex hedge purchase strategies.
You should know what you're getting for the excess spreads you're paying. And what you're giving away. The FXConsulting team offers a simplified forward pricing tool to help you begin to understand the interest differential cost from forward and future contracts. This tool compares the cost of an forex carry spot trade with a forex forward contract and identifies additional components of the spread that may be charged to you.
Further, FXConsulting will help lower your forex hedging and currency transaction costs by:
- Providing free education on the forex market
- Providing you access to free information on real-time foreign exchange rates
- Offering expertise on implementing Best Forex Practices in your company
- Sourcing alternative creditworthy and reliable forex suppliers (other banks or online forex brokers)
With increased understanding, you will be able to closely examine your forex trading relationship with your bank—to ask the right questions of your bank, listen carefully to their answers, and challenge them when necessary.
Be prepared to make a change. Otherwise, you'll have to settle for paying more and not knowing what you're getting for that extra cost.
