risk for small business banks: case study on...
Post on 02-Feb-2021
0 Views
Preview:
TRANSCRIPT
-
CONFIDENTIAL– DONOTDISTRIBUTE©CapitalPlusExchange2016
Foreign Exchange Risk for Small Business Banks: Case Study on XacBankJulieAbramsAmarHanibal
21April,2016
-
CONFIDEN
TIAL–DON
OTDISTRIBUTE©CapitalPlusExchange2016
Upcoming Webinars
18May SMEFinanceForum&CapPlusWebinar:FinancingWomen‐OwnedEnterprises
20July SMEFinanceForum&CapPlusWebinar:BitcoinandBlock‐Chain/DecentralizedLedgerTechnology
Viewlocaltimesandregisterat:www.capplus.org/events
-
CONFIDEN
TIAL–DON
OTDISTRIBUTE©CapitalPlusExchange2016
Webinar objectives• Foreignexchangerisk:
o Definitiono Howmeasuredo Whyimportant
• XacBank:o Overviewo FXriskmanagementchallengesandinnovationso Lessonslearned
-
CONFIDEN
TIAL–DON
OTDISTRIBUTE©CapitalPlusExchange2016
SME FX risk definition
Foreignexchangerisk:Thepossibilityoffinanciallosstothebankarisingfromadversemovementsinforeignexchangerates
-
CONFIDEN
TIAL–DON
OTDISTRIBUTE©CapitalPlusExchange2016
Measure FX risk through net open position
Netopenposition:• Percurrency• Institutioncansetpositionlimits
• Regulatormaysetprudentiallimits
(intrillionsoftogrog) MNT USDASSETS (A)Loanstocustomers 382Otherassets 148
1 TotalAssets 530
LIABILITIES(L)Borrowedfunds 377Otherliabilities 159
2 Totalliabilities 535
1‐2 Netopenposition=A‐L ‐6
3 Totalequity 122
(1‐2)/3 Netopenpositionas%ofequity -5%
-
CONFIDEN
TIAL–DON
OTDISTRIBUTE©CapitalPlusExchange2016
Origin of XacBank’s FX risk
Localcurrency:togrog(MNT)
• International lendersissueloans:oMostinUSD,notMNTo3‐yearaveragetenoroCreatesUSDB/Sliabilities
-
CONFIDEN
TIAL–DON
OTDISTRIBUTE©CapitalPlusExchange2016
Which was worse: FX losses or higher credit costs?
• Dataanalyzedfrom2008‐09for2013‐14oFXlossesoNPLoProvisioning
“Forecastsandmodelssupportedourgutfeeling.”
-
CONFIDEN
TIAL–DON
OTDISTRIBUTE©CapitalPlusExchange2016
Xac had sense of urgency re: rising FX risk
“Wecouldn’tsitidlyonourhandswaitingforthingstogetworse.”
• Roleof:oExecutiveBankCommitteeoAsset‐LiabilityCommittee(ALCO)oBoard
-
CONFIDEN
TIAL–DON
OTDISTRIBUTE©CapitalPlusExchange2016
Lessons learned1) Conundrum:
o Raisinghardcurrencyfromabroado Lendinginlocalcurrency
2) Analyze USDlendingimpacton:o Customerso Bottomline
3) Innovate toaddressFXrisk4) Nosilverbullet
-
CONFIDEN
TIAL–DON
OTDISTRIBUTE©CapitalPlusExchange2016
Key takeaways
• Qualityofearningsmattersmost• Changed5‐yearstrategy:
o Was:BelargestbankinMongoliao Now:BemostprofitablebankinMongolia
-
CONFIDEN
TIAL–DON
OTDISTRIBUTE©CapitalPlusExchange2016
“ThepastyearhasbeenachallengingyearforsomanycompaniesinMongoliagiventhedepreciatingcurrency…
Weareworkingtogetherwithourclientstoovercomethesechallengesandwebelievethiscollaborationwouldstrengthenourrelationshipwithclients.”
Parting words
-
CONFIDEN
TIAL–DON
OTDISTRIBUTE©CapitalPlusExchange2016
Questions&Answers
-
CONFIDEN
TIAL–DON
OTDISTRIBUTE©CapitalPlusExchange2016
top related