Banking News

Critical FX Counterparty Diversification Imperative – MillTechFX

(15 April 2024 – United Kingdom) Recent banking history highlights the importance of CFOs possessing a strong and diverse panel of counterparties.

The Global Treasurer reports that a bank’s failure can cause serious short-term liquidity issues among other FX risks which include the inability to maintain the FX hedge, lost collateral and in-the-money FX hedges.

“Pricing can also be positively affected by having multiple counterparties. Given the lack of transparency in the FX market, it can be incredibly difficult to compare prices without having access to multiple banks. Trading at the best available rate at any given time could be made impossible since they have no other market access points” commented MillTechFX Head of Corporate Solutions, Jason Gaywood.

“Businesses should consider establishing a robust counterparty risk evaluation framework that considers a range of risk factors. These include monitoring realised and unrealised profit and loss for each counterparty, credit rating from reputable rating agencies, credit default swaps as well as regular counterparty review and monitoring activities.”