Kutoka NBC

NBC LAUNCH FX PRODUCTS FOR CORPORATE CLIENTS  

Dar es Salaam, October 11^th, 2010: In its efforts to provide innovative products for its clients that can help them to better manage their financial risks, the National Bank of Commerce (NBC) has launched FX Options derivatives for its corporate clients.  

The product aims at assisting corporates especially the likes of exporters and importers, to minimize their foreign exchange risk. “We have seen a lot of volatility with the Tanzanian Shilling recently resulting into uncertainty for those with foreign exchange exposure. This FX Options product is another hedging tool that our customers can use to minimize their FX risk, in addition to the already existing FX Forward Contract product” said Mr. Pius Tibazarwa, Head of Treasury at NBC during an interview. 

Whilst the FX Forward Contract allows the client to agree to exchange an agreed amount of two currencies at a future date, the client is obliged to honor the contract at maturity even if the market has moved against them. However, prior knowledge of exchange rates that one will transact with undoubtedly assists with improved cash flow projections and cost management for the client. 

With FX Options, the client will agree a future exchange rate with the bank (known as the strike rate) and will then pay a premium upfront in order to give them the flexibility on maturity to decide either to exchange the two currencies at the agreed rate with the bank or go elsewhere in the market if the price is better. This can be looked at as buying insurance against exchange rate fluctuations. 

Within the Options derivatives, the bank can put together many different structures which are tailor made to suit the customer’s needs. “We have already traded our very first FX Options transaction with one of the large corporate companies here in Tanzania. Very soon we expect to launch more products for our clients such as Interest Rate Swaps (IRS), Cross-Currency Swaps (CCS) and Commodity Derivatives all of which are hedging products that our clients can use to minimize their interest rate and commodity price risk.   

“More information on the products can be obtained via NBC’s Treasury Department which offers a wide range of innovative products that can assist our clients in the management of their foreign exchange and interest rate risk as well as investment opportunities. Our product portfolio includes FX Spot, FX Forwards and Swaps, FX Options and on the investment side, fixed or term deposits as well as investment in government securities through the bank’s Primary dealership license.  

“Through our affiliation to the Absa group, we are able to combine the backing of a larger, international financial services group, with our deep understanding of the Tanzanian financial market, through our well trained and professional dealers to deliver a world class product suite.” said Mr. Tibazarwa.

-ENDS-