The Foreign Exchange (FX) market is one of the largest markets in the world, trading in FX markets averages £5.3 trillion a day, with it continuing to grow year upon year, it has doubled in value since 2004.
The biggest geographic trading center is the United Kingdom, principally London, with 40% of daily activity taking place there. Due to London’s dominance in the market, a particular currency’s quoted price is usually the London market price.
Businesses that trade internationally are often required to protect themselves from currency fluctuations, they do this by entering in to extremely complex hedging agreements with their bank. In some cases banks have taken advantage of the complexity of these agreements and sold highly inappropriate products that weren’t needed. Instead of protecting business these products have often left business who entered in to them with soaring debts.
In an age of international trade, the use of derivative products for businesses wishing to expand overseas has increased. Currency Swaps can allow a company to enter into a foreign market with the benefit of domestic rates in the respective country. The benefit is that Company A can gain entry into a new market at a lower cost than borrowing money in its own country. Whilst Company B, who also wishes to trade overseas, may use Company A’s position to gain the benefit of domestic borrowing.
Like all hedging, Currency Swaps are designed to reduce or manage a risk by offsetting Company A’s position in Country B. Currency Swaps can be very flexible with long term maturities, however, often the problem is a lack of price transparency. The lack of transparency in such deals can lead to higher costs.
Currency Swaps are governed by the same regulation as Interest Rate Hedging Products (IRHPs). As the market leader in IRHP claims, Seneca Banking is uniquely placed to be able to offer a claims management solution to those who fear they may have been mis-sold a Currency hedge. Currency hedging products take many forms, such as Caps, Options and Puts, and can be extremely complex. The complexity and term of Currency Swaps can make them unsuitable. Seneca is able to analyse their financial suitability and advise on the grounds for a claim.
Seneca Banking has recovered £millions on behalf of businesses affected by hedging products and is uniquely placed as UK market leader regarding these complex claims. Our expertise have been built upon decades of experience across the Banking, Finance, Legal and Regulatory Sectors.
Get in touch today for a free, no obligation consultation with one of our corporate banking consultants if you have ever been sold a hedging product by your bank.