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The purpose of exchange rate insurance is to alleviate uncertainty surrounding fluctuations in the exchange rate of different currencies listed on the Spanish currency market.
Terms and Conditions. In order to take out exchange rate insurance, you must:
- Have a Foreign Trade Facility in place, since 10% of the insured amount will be allocated as risk.
- Have activated your Phone Banking service
- All the intervening parties in the Foreign Trade Facility (including the legal entity) must have received the pre-contractual information.
- The legal entity (through the representative of the Foreign Trade Facility) must have taken the Suitability Test.
- All the intervening parties in the Foreign Trade Facility must have a MIFID category assigned with us, since they are classed as complex products.
Types of insurance
To take out closed exchange rate insurance, the customer must know the exact amount and expiry of the commercial operation covered by said insurance.
Because taking out this insurance represents an obligation for the customer, the customer must know that two working days prior to expiry, the insurance policy will take effect and be applied to the corresponding commercial operation.
If, when expiry comes around, the commercial operation has been delayed or brought forward, the customer has the obligation to execute the exchange rate insurance taken out. If the customer does not have the relevant currency to hand over or the euros required to buy the agreed currency, they will be found in breach of the exchange rate insurance.
Breach of the insurance means that the opposite operation will be carried out to the one represented by the insurance. In other words, if the exchange rate insurance was taken out in order to buy currency, if breached, currency will be sold at the spot rate, and likewise if the insurance was taken out to sell currency, it will be bought at the spot rate. This breach will generate a difference in the exchange rate which might be positive or negative depending on the performance of the currency.
When open exchange rate insurance is taken out, a final expiry date and a global amount is fixed, but partial usage may be made throughout the term of the exchange rate insurance.
If, on the expiry date, there are any funds available in the exchange rate insurance, if there is no operation where they can be applied, there will be a breach of the available funds.
Such a breach means that the opposite operation will be carried out to the one represented by the exchange rate insurance at the spot rate. In other words, if the exchange rate insurance was taken out to buy currency, a breach means it will be sold, and likewise, if it was taken out to sell currency, a breach means that it will be bought. This breach will generate a difference in the exchange rate which might be positive or negative depending on the performance of the currency.