INTERNATIONAL TRADE FINANCE AND FOREX OPERATIONS

Objective:

Consequent upon globalization, the size of international trade and intricacies of foreign exchange transactions are increasing day after day.  Keeping in pace with these developments, IBP has revised the existing syllabus to familiarize changing economic mechanisms and further update the level of knowledge of our Bankers. Accordingly the course outline has been made more specific to provide a clear understanding of the subject and highlights the areas of expertise and its application in live banking transactions. 

Curriculum:

The subject “International Trade and Foreign Exchange” is intended to meet challenges under the present scenario and provide an in depth knowledge on the following:

The entire course is divided in to the following three parts under the sub-headings Conceptual, Operational and Procedural:

A) International Trade

B) Foreign Exchange – Markets, Rates and Products

C) Foreign Direct Investments and International Lending

A.        International Trade:

Introduction to International Trade Finance: International trade --- nature and substance; risks and complexities inherent in foreign trade. Modes and methods of international debt settlement, an overview --- Nostro Account; Vostro Account; counter trade; documentary collection; documentary credit.

Conceptual

Overview – what is international trade, how it differs from domestic trade, the economic reasons in support of international trade, its implications on balance of trade and balance of payment; its advantages and drawbacks. The role of  WTO, the policies of Government of Pakistan and foreign exchange regulations of State Bank of Pakistan.

• The meaning of “Terms of Payment”

• Open Account

• Advance Payment - Its advantages, disadvantages and risks involved.

• Documentary Collections

• Documentary Credits

• Transferable Letters of Credit and Back-to-Back Letters of Credit -

• Bonds, Stand by Letters of Credit

Operational:

• Operation of a Documentary Collection;

• Operation of Documentary credit

• Methods of International settlement through Banks

• Documents of Foreign Trade

• Transport documents

• Documents other than transport documents

• Incoterms

• Short term finance for exporters

• Bonds, Stand by Letters of Credit

• Counter trade

Procedure and System

• Imports: Under LC

• Inward Documentary Collection

• Exports

• Trade Finance in foreign currency

• Export Bills purchased – foreign currency

FOREIGN EXCHANGE

Conceptual:

• What is meant by “Foreign Exchange” and why foreign exchange; The Foreign Exchange Markets; The forward exchange market; The relationship between spot, forward, relative interest rates and relative inflation rates; Different types of exchange rate regimes; The European currency (the Euro); The Asian Clearing Union (ACU).

• The Globalization of Financial Markets - The Euro Markets; The Foreign Exchange Market; Liberalization; Innovation

• Mechanics of foreign exchange

• Foreign Exchange Position  - Overbought; oversold, open position, square; Exchange limits; individual currency limits, settlement limits, overnight limits.

• Spot rates and forward rates

• The Exchange Rate Forecasting and Risk - Forecasting the spot exchange rate; The role of exchange risk; Portfolio balance effects on the exchange rate

• Foreign Currency Options / Pure Options

• Operational

• Close outs and extensions of Forward Contracts

• Management of Foreign Currency exposure

• Exchange control in Pakistan

• Systems and Procedures

• Treasury

• Foreign Currency Account

Foreign direct investment and international loans.

• Foreign Direct Investment; 

• Portfolio Investment;

• International Loans;

Reading material recommended

1.         Pakistan, Institute of Bankers               International Trade Finance and Foreign Exchange

Volume-I & II

2.         Pakistan, Institute of Bankers                International Trade, Investment and Debt

Management

3.         Cowdell/Hyde/Watson             Finance of International Trade 7^th Edition

4.         William Baughn, Thomas Storrs            The Bankers Handbook 3^rd Edition

and Charles Walker

5.         Asrar H. Siddiqi                                   Finance of Foreign Trade & Foreign Exchange

                                                                        Latest Edition

SUPPLEMENTARY READINGS

1.         Pakistan, Institute of Bankers                International Banking

2.         Pakistan, Institute of Bankers                International Trade, Investment and Debt

Management

3.         International Chamber of                       ICC-500 – Uniform Customs & Practices for

Commerce Publications                        Documentary Credits

4.         Pakistan, State Bank of                         Exchange Control Manual

-.-.-.-.-