This document provides you with key information about this investment product. It is not marketing material. The information is required by law to help you understand the nature, risks, costs, potential gains and losses of this product and to help you compare it with other products.
Foreign Exchange Swap
Date of publication: 03 January 2018
YOU ARE ABOUT TO PURCHASE A PRODUCT THAT IS NOT SIMPLE AND MAY BE DIFFICULT TO UNDERSTAND.
WHAT IS THIS PRODUCT?
Type Over the Counter Derivative (OTC) – FX Swap
Objectives A Foreign Exchange (FX) Swap is an agreement to exchange currencies (usually value today, tomorrow or spot) at an agreed rate and to then inversely exchange the same currencies, using the same spot rate (adjusted for the relevant forward points) on a future date. It is one of the tools available to help you manage your foreign currency cashflows.
For example, say one of your company’s foreign currency accounts is currently overdrawn or requires funding. Your main Euro current account is in credit to the equivalent amount. This situation will exist for a one week period. You wish to debit your main current account and credit your foreign currency account with the equivalent for the duration of this one week period. If you purchase the required foreign currency amount in order to fund your account, you will need to sell it back in one week’s time – running the risk that the exchange rate will have moved adversely in the period.
An FX Swap will allow you to exchange the currencies using the same spot rate (adjusted for the forward points) and therefore manage your foreign exchange risk.
Intended Investor This product is intended for businesses wishing to mitigate the exchange rate risk associated with future currency exposures are in-scope for these regulations and who are seeking to hedge future currency exposures, such as future import or export transactions. An FX Swap is a binding contract between you and Bank to exchange a specific amount of two currencies at an agreed rate, on a near leg and future date(s). FX Swaps are tailored to meet your specific requirements. The client confirm the currencies, amount and both the near and future date(s) required.
Terms FX Swaps can be booked in all major currencies (minimum amount EUR 100,000 equivalent) with a final maturity date of up to two weeks. The respective value dates of the transaction will be agreed at execution and will be set out with the other product terms in the confirmation. It is a product which is entered into for its term, although early termination may occur in the event of a default by either you or Bank.
FX Swap – Key Information Document
WHAT ARE THE RISKS AND WHAT COULD I GET IN RETURN?
The summary risk indicator is a guide to the level of risk of this product compared to other products. It shows how likely it is that the product will lose money because of movements in the markets or because we are not able to pay you. For the purposes of determining market risk, PRIIPs are divided into 4 categories. Category 1 cover PRIIPS that fall within one of the categories referred to in items 4 to 10 of Section C of Annex 1 to Directive 2014/65/EU of the European Parliament and of the Council. The MRM (Market Risk Measure) class for Category 1 PRIIPS shall be 7. We have classified this product as 7 out of 7, which is the highest risk class. If you cannot fulfil your contract, you may not be able to terminate it easily before maturity or you may have to end your product at a price that significantly impacts on the performance of your product. The total loss you may incur may be significant. This product does not include any protection from future market performance so you could incur significant losses. In the event that Bank is not able to pay out what is owed, you could incur significant losses.
PERFORMANCE SCENARIOS
Scenarios below are based upon a EUR/USD swap contract assuming a nominal amount of EUR100,000 at an agreed exchange rate for delivery in 1 week. This table shows the money you could get back or pay after costs in 1 week time (should you require to terminate the contract), under different scenarios assuming a nominal value of EUR100,000.
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Nominal Amount EUR 100,000 |
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Scenarios |
1 week |
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Stress Scenario |
What you might back/or pay after costs. Average return/loss over nominal amount each year |
(EUR 10,000) -10% |
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Unfavourable Scenario |
(EUR 4,000) -4% |
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Moderate Scenario |
(EUR 500) 0.5% |
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Favourable Scenario |
(EUR 5,000) 5% |
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WHAT HAPPENS IF Bank IS UNABLE TO PAY OUT?
When buying the product you assume a credit risk on the issuer. In the event of the issuers bankruptcy, the holder of the product will have an unsecured claim versus the bank. Note that the product is not covered by any deposit guarantee scheme.
WHAT ARE THE COSTS?
The Reduction in Yield (RIY) shows what impact the total costs you pay will have on the performance of the product. The total costs take into account one-off, ongoing and incidental costs. The amounts shown here are the cumulative costs of the product itself, for three different holding periods. They includepotential exit penalties. The figures assume a nominal value of EUR100,000. The figures are estimates and may change inthe future.
FX Swap – Key Information Document
TABLE 1: COSTS OVER TIME
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Notional Amount Scenarios EUR 100,000 |
If you end after 1 week |
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Total Costs |
EUR 1,000 |
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Impact on return (RIY) per year |
1% |
TABLE 2: COMPOSITION OF COSTS
- The table below shows:The impact each year of the different types of costs on the performance of the product at the end of the holding period;
- The meaning of the different cost categories.
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This table shows the impact on return per year |
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One-off costs |
Entry costs Exit costs |
1% n.a. |
The impact of the costs you pay when entering your investment. The impact of the costs of exiting your investment when it matures. |
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Ongoing costs |
Portfolio transaction costs |
0% |
The impact of the costs of us buying and selling underlying investments for the product. |
HOW LONG SHOULD I HOLD IT AND CAN I TAKE MONEY OUT EARLY?
This product cannot be sold or transferred and there is no recommended holding period, it is a product which is entered into for its term. This product cannot be easily ended. This means it is difficult to estimate how much you would get if you end before maturity. You will either be unable to end early or you will have to pay high costs or make a large loss if you do so.
HOW CAN I COMPLAIN?
You can make a complaint by:
- Contacting (Mon-Fri 09:00 – 19:00 (GMT+3),Saturday & National public holidays of Latvia 09:00 – 17:00 (GMT+3)) us on complaints and suggestions phone number +371 6728 1995 or through our Contact Center 8515 or +371 6704 1300 (for calls from abroad).
Website: www.privatbank.lv
OTHER RELEVANT INFORMATION?
The agreement governing the product is provided to you as separately agreed. The information contained in this Key Information Document does not constitute a recommendation to buy or sell the product.