The latter, in turn, is divided into short and long currency positions

Indoor overall currency position arises when the amount of assets and off-balance requirements for certain foreign currency equal to the sum of balance sheet and off-balance sheet obligation in the same currency. In terms of currency risk such a position poses no threat to the bank, since due to changes in exchange rates and assets and liabilities will change by the same amount at a constant amount of bank capital. Open foreign currency position arises when the amount of assets and off-balance requirements for certain foreign currency is not the same as the sum of the balance sheet and off-balance sheet liabilities in foreign currency. With respect to risk such a position is a threat to the bank, because with the change of the exchange rate assets and liabilities are not changed by the same amount that would change the size of the bank's capital. Long open foreign currency position - a situation where the amount of assets in certain foreign currency exceeds the amount of liabilities in foreign currency. Bank in such a position may suffer losses due to depreciation of foreign currencies relative to national income and receives in the form of positive exchange rate difference in the case of depreciation of the national currency against foreign currency. A short open foreign currency position - a situation where the amount of liabilities in certain foreign currency exceeds the amount of assets in foreign currency. Bank in such a position may suffer losses due to devaluation of national currency against foreign currency and receive income in the form of positive exchange rate difference in the case of depreciation of foreign currencies relative to the national one. For the duration of this position is divided into: daily open currency position (varies throughout the day), carrying the open currency position, moves to the next day and is reflected in the accounts of the restructured balance sheet. By appointment allocate speculative currency position and the position of foreign exchange for hedging. In addition, more differentiated and structural foreign exchange position at which the bank uses to protect against the adverse effects of possible changes in exchange rates on the ratio of its capital and assets (risk of failure of capital). It should be noted that changes in foreign exchange positions of banks are ongoing as a result of foreign currency transactions undertaken by them. Financial institution requires constant consideration of open positions of the bank. And in terms of effective management of the open foreign currency position of the bank each long position in foreign currencies are always balancing the short position in another currency. Category: Management Operations Commercial Bank | Tags: currency