New calculation method of daily forex position of banks
Thursday, 31 December 2009
Siddique Islam
The central bank has introduced a new calculation method of daily foreign exchange position for the commercial banks considering the regional as well as global calculation practices.
"We've introduced the new calculation system of daily foreign exchange position for the banks in line with Basel-II framework," a senior official of the Bangladesh Bank (BB) told the FE Wednesday.
Under the new calculation system, total of over bought among the foreign exchanges and total of over sold among the currencies which ever is higher shall be treated as exchange position of the day for the banks concerned.
Currently, the banks are fixing their daily exchange positions by netting of the over bought and over sold among the foreign currencies.
"The new calculation system will finally come into effect from February 1, 2010," the BB official said, adding that the banks will be allowed to report on daily exchange position maintaining both new and existing calculation formulas from January 10-31.
The central bank issued a circular in this connection Wednesday and asked the commercial banks to follow the new calculation system of daily exchange position properly.
In South Asia India, Pakistan and Sri Lanka have already adopted the daily foreign exchange position calculation method in line with the Basel-II accord.
"Banks shall maintain their overall exposures in foreign currencies (overall net exchange position) within the open position limit at the end of the day," the BB said.
The open position limit is required to be approved by the central bank on the basis of total capital and some other qualitative judgments.
In September this year, the BB has increased the net open position (NOP) limits of commercial banks for holding foreign exchange in order to keep the inter-bank forex market stable.
The central bank has introduced a new calculation method of daily foreign exchange position for the commercial banks considering the regional as well as global calculation practices.
"We've introduced the new calculation system of daily foreign exchange position for the banks in line with Basel-II framework," a senior official of the Bangladesh Bank (BB) told the FE Wednesday.
Under the new calculation system, total of over bought among the foreign exchanges and total of over sold among the currencies which ever is higher shall be treated as exchange position of the day for the banks concerned.
Currently, the banks are fixing their daily exchange positions by netting of the over bought and over sold among the foreign currencies.
"The new calculation system will finally come into effect from February 1, 2010," the BB official said, adding that the banks will be allowed to report on daily exchange position maintaining both new and existing calculation formulas from January 10-31.
The central bank issued a circular in this connection Wednesday and asked the commercial banks to follow the new calculation system of daily exchange position properly.
In South Asia India, Pakistan and Sri Lanka have already adopted the daily foreign exchange position calculation method in line with the Basel-II accord.
"Banks shall maintain their overall exposures in foreign currencies (overall net exchange position) within the open position limit at the end of the day," the BB said.
The open position limit is required to be approved by the central bank on the basis of total capital and some other qualitative judgments.
In September this year, the BB has increased the net open position (NOP) limits of commercial banks for holding foreign exchange in order to keep the inter-bank forex market stable.