Global experience that delivers

Transcription

1 Foreign Exchange Services Global experience that delivers Foreign Exchange Services Phone:

2 Relationship focused: real people, real partnerships. We provide more than just products; our experienced specialists study your needs and propose a customized blend of services and solutions. As one of North America s leading FX dealers, Wells Fargo supports correspondent bank customers with a national sales group dedicated solely to financial institutions and a service program that provides banks with the ability to resell our FX services on a private label basis.

3 A growing international market Wells Fargo, a partner to grow your platform In today s global economy, international transactions by small businesses and individuals are growing even faster than those of large corporations. By facilitating these transactions, you can attract and retain high-value customers and tap into a rapidly growing revenue stream. Wells Fargo can help you realize these benefits without you taking on the costs and risks associated with managing your own foreign exchange department. Furthermore, we will give you access to the expertise, technical solutions, and operational support you need to provide a complete range of foreign exchange products under your own brand. When you work with Wells Fargo, it will be through a team of service support resources exclusively focused on the needs of correspondent bank partners. Your customer information will be secured and kept strictly confidential. Our experienced professionals are here to help you and your customers succeed in the global economy. Foreign Exchange Services 1

4 Expertise your customers need, support you can depend on Benefits to your bank u Enhance competitiveness: Attract and retain key customers. u Increase revenue: Generate fee and FX spread revenue on each transaction. u Maximize efficiency: Utilize Wells Fargo s technology to streamline processing. u Improve customer service: Leverage Wells Fargo s expertise and global network to provide your customers with unparalleled levels of service. Benefits to your customers u Added convenience: Become the one-stop shop for providing your customers with access to financial solutions to meet all their domestic and international banking needs. u Gain competitive advantage: Give your customers the potential to negotiate more favorable pricing and payment terms using foreign currency. u Save time and money: Accelerate international payments and eliminate intermediary institutions, enabling your customers to potentially save both time and money when transacting with overseas vendors. u Improve vendor/counter-party relationships: Optimize the international payment process so that overseas vendors and individuals send and/or receive payments by the most convenient and cost-effective means possible, making it easier for them to transact with your customers. 2 Foreign Exchange Services

5 To meet the growing demand for international payment services, banks must now offer a full range of solutions in order to stay competitive. Enhancing your bank s international payment service offering will benefit your bank, as well as your customers.

6 Attract new business, increase profits, and function more efficiently by establishing a relationship with a correspondent bank that not only offers products and services, but the advice and expertise you need to stay competitive.

7 A solution to fit every need Wells Fargo Global Correspondent Banking maintains one of the largest correspondent banking franchises in the U.S. and overseas, offering both domestic and international correspondent banking services. International wires u Account-to-account electronic payments sent to and from overseas banks u Denominated in U.S. dollars or in foreign currency Foreign checks u Checks drawn on banks outside the U.S. u Denominated in U.S. dollars or in foreign currency u Cleared either through collection (i.e. item sent to original drawing bank overseas to clear) or through a foreign cash letter (i.e. immediate provisional credit, though the item is cleared through a foreign check clearing network) Foreign drafts u Check denominated in a foreign currency drawn on a bank overseas, typically located in the country of the currency s origin International ACH u In-country electronic clearing system for processing bulk debits and credits, typically used for low-value repetitive payments u Denominated in U.S. dollars or in foreign currency Banknotes u Foreign currency used by countries abroad Foreign Exchange Services 5

8 Multiple delivery channels, seamless processing Our goal is to make international payment services accessible and seamless for our correspondent banking partners. We can process your international payments through any combination of the following channels: Foreign Exchange Online (FXOL) Wells Fargo s comprehensive, real-time foreign exchange system enables correspondent banks to process and manage their foreign exchange needs online, quickly and easily. WellsXchange The WellsXchange interface connects your core wire system and/or customer-facing Internet platform directly to Wells Fargo s real-time FX payments. Fed-to-SWIFT By using a Fedwire formatted to Wells Fargo s specifications, this service allows your bank to process international wires to SWIFT beneficiary banks abroad. SWIFT For correspondent banking partners that are direct members of SWIFT or SWIFT Alliance Lite, this wire transfer service allows your bank to process International USD and foreign currency wires, leveraging our network of SWIFT partners around the world. Phone and fax Correspondent banks can process international and domestic wires via phone and fax. This method is used primarily as a back-up or as part of a financial institution s business continuity program. 6 Foreign Exchange Services

9

10

11 Managing the risks in an ever changing market Risk Management and Investment Products enable your financial institution to offer your customers solutions that help them manage the risks and opportunities associated with changing currency values. Forward contracts A forward contract is an agreement to exchange a fixed quantity of currency on a pre-set future date at a pre-agreed rate. The terms of the contract are always set at the inception of the trade. As a result, the hedging party knows on the booking date what the exchange rate will be on the stated future date. Options An option is an agreement that gives the holder the right, but not the obligation, to buy/sell an agreed amount of currency (the notional) at a set price (the strike rate) on some specified future date (the expiry). The protection comes at some stated cost (the premium). Multi-currency accounts A multi-currency account is an offshore bank account denominated in a specific currency, which allows the account holder to make and/or receive payments in that currency. Multi-currency accounts are domiciled at Wells Fargo s Cayman Islands Branch. Foreign currency time deposits* This Deposit of foreign currency is held in an offshore account domiciled at Wells Fargo s Cayman Islands Branch. The account earns a fixed rate of interest, depending upon the size of the deposit balance, the currency in which the funds are held, and the term of the deposit. *Generally offers higher interest rates than a standard onshore deposit. Interest is paid in the currency in which the funds are held. Foreign Exchange Services 9

12 In-depth product solutions Foreign Exchange Online International ACH...13 Multi-currency account...16 Common questions about...18 multi-currency accounts Fed-to-SWIFT Offshore time deposits Vanilla option put long currency Vanilla option call short currency Foreign Exchange Services

13 Foreign Exchange Online Wells Fargo s Foreign Exchange Online (FXOL) service is a comprehensive, real-time foreign exchange system that lets customers manage their foreign exchange transactions and information needs online. Part of the Wells Fargo Commercial Electronic Office (CEO ) business portal, Foreign Exchange Online combines the advantages of Wells Fargo s competitive foreign exchange rates with the convenience of sending payments throughout the world online. Foreign Exchange Online contains built-in error-checking to enhance the accuracy and security of your data. Customer benefits u Real-time foreign exchange transactions can be initiated right from your desk, eliminating phone calls to the bank for foreign exchange rates. u Personal training and a user-friendly manual make Foreign Exchange Online easy to use. You can begin entering foreign exchange transactions immediately after the system is set up. u Multiple users in different offices can access the system simultaneously to buy or sell foreign currency. u Repetitive payments can be issued quickly by entering beneficiary settlement instructions in the Foreign Exchange Online database. u Inquiries are simplified by using the system s advanced inquiry features. u Calculation and conversion errors are eliminated automatically. u Data is protected through personalized sign-on, three-factor authentication (company ID, user ID, and password), token key, and 128-bit key encryption. u Online electronic confirmations eliminate paper from the process. Foreign Exchange Services 11

14 Product solutions (cont.) Foreign Exchange Online (cont.) How it works 1. Login to the CEO portal and go to Foreign Exchange Online. 2. Enter your transactions into the Foreign Exchange Online input screens. Click the REQUEST button to display an exchange rate and then the ACCEPT button to lock it in. 3. Once the exchange rate has been accepted, you can add instructions to the transaction by clicking the SETTLE button. For repetitive transactions, select that option. For nonrepetitive transactions, type in instructions as needed. 4. Use the online pop-up HELP menu or call our toll-free technical support number if you need assistance. System requirements u IBM-compatible Pentium II processor, 333 MHz or higher u Windows 95, 98, NT (4.0), 2000, or Millennium u Netscape Navigator 4.07, Netscape Communicator 4.6, or Microsoft Internet Explorer 5.01 SP2 or higher (Browser must support SSL, HTML 2.0, JavaScript 1.1, and 128-bit encryption) u 56K modem or faster* u Internet access** * The speed of the connection is a major determining factor in the product s performance. ** To ensure maximum efficiency of the Commercial Electronic Office business portal, your system must meet the minimum browser requirements. To review these requirements and Internet connectivity information, please refer to the Environmental Systems Guide fact sheet, or ask your sales representative for more information. Learn more For more information on Wells Fargo s foreign exchange services, contact us at or fxservices@wellsfargo.com. 12 Foreign Exchange Services

15 International ACH Wells Fargo is one of the few banks that can offer you a cost-effective means to efficiently disburse and receive International payments. With Wells Fargo s International ACH service, you can reduce the cost of moving funds, increase control over your cash flow, and integrate your domestic and international cash management systems. ACH payments and collections are currently available for Canada in either Canadian or U.S. dollars. ACH payments are available for Mexico, Europe 1, Australia, Hong Kong, India, New Zealand, and Singapore. How you benefit u Reduced funds movement costs. ACH is the most cost-effective clearing method available, helping you to reduce your funds movement costs compared to wire transfers, foreign cash letters, checks, and drafts. u More predictable cash flow. International ACH eliminates the unpredictability of sending and receiving paper payment instructions because you designate exact dates for settlement. You can more accurately manage your accounts and maximize your use of available funds. u Integrated disbursements. With Wells Fargo s International ACH credit origination, you can initiate payments with ease to vendors, employees, or shareholders living in the U.S. or the countries we serve. u One-bank convenience. Banking with Wells Fargo eliminates the need to form foreign banking relationships because we provide complete format conversion as well as foreign exchange and settlement services through your existing Wells Fargo U.S. dollar or multi-currency account. You will not need to factor foreign exchange rates into each transaction prior to transmitting your file. Moreover, you can originate payments in either U.S. dollars or local foreign currency, including euros. u Easy implementation. The International ACH service works the same way as Wells Fargo s domestic ACH but with a foreign exchange component. You can send domestic and international payments to Wells Fargo in separate batches or within one transmission. Foreign Exchange Services 13

16 Product solutions (cont.) International ACH (cont.) u Multiple origination options. You have three methods of transferring your ACH files to Wells Fargo. 1. Direct origination allows you to create ACH files in-house and deliver them by electronic data transmission. 2. CEO Global Payments service allows you to create and deliver ACH files online through the CEO business portal. 3. Payment Manager service allows you to initiate International ACH payments using any standard or proprietary file format. u 45-day warehousing capability. You can send ACH items to Wells Fargo up to 45 days in advance and they will be automatically released into the payment system just before the settlement date. u Electronic return reporting. We present all of your returned 0r notification of change items electronically by fax, by transmission, or through the CEO business portal. Our 20-day item archive allows Wells Fargo to electronically match returned items with original transactions with an accuracy rate of 98 percent. This unique feature helps you reconcile returns, determine their causes, and avoid them in the future. You receive a detailed returned items report by 9:00 a.m. Central Time (7:00 a.m. Pacific Time) each banking day. u Fast confirmation. With Wells Fargo s continuous processing environment, we provide confirmation notifications (CNotes) to all customers within 15 minutes of receipt of your ACH file. The confirmation verifies receipt of the file, notifies you that processing has begun, and indicates whether or not your file contains errors. u Electronic document delivery (EDD). We can expedite the distribution of your complete payment information by , secure , fax, or data transmission in a variety of electronic file formats. 1 Europe includes Austria, Belgium, France, Germany, Ireland, the Netherlands, Spain, Switzerland, and the United Kingdom. 14 Foreign Exchange Services

17 u World-class service. At Wells Fargo, customer service is our top priority. We offer centralized customer service for your international ACH items and work with you to help your company expand its presence in the global marketplace. How it works u Employees or vendors sign authorizations as needed and provide you with their bank account information. u Your company sends the payment information electronically to Wells Fargo using our direct origination, Internet ACH, or Payment Manager service. u On the settlement date, Wells Fargo debits your account for the total of all items in the file. On or shortly after the settlement date, we post the individual credit transactions to your beneficiaries accounts around the world. Flexible processing schedules u Extended transmission windows 24 hours a day, 7 days a week u Advance file-warehousing schedule send payment files up to 45 days in advance u Continuous processing environment file confirmations available within 15 minutes Related services Exception item reporting part of the Treasury Information Reporting service available on the CEO business portal. Learn more For more information on Wells Fargo s foreign exchange services contact us at or fxservices@wellsfargo.com. Foreign Exchange Services 15

18 Product solutions (cont.) Multi-currency account A Wells Fargo Multi-Currency Account (MCA) 1 offers you greater convenience with your foreign currency transactions. You can deposit foreign receivables without having to convert them to U.S. dollars, accumulate foreign funds to meet payables requirements, and transfer funds from U.S. dollar accounts or foreign bank accounts by check or wire. A MCA makes your foreign purchases and sales easier and more profitable by allowing you to negotiate prices and make payments in local currency, helping you to become more competitive in global markets. Available account types u Interest-Bearing Account Minimum required balance U.S. $100,000 equivalent Interest rate varies by currency u Non-Interest Bearing Account No minimum balance required How you benefit u Make deposits and withdrawals easily and conveniently by incoming wire and foreign cash letter. Make withdrawals by draft, wire, and international ACH. u Have your funds swept to your Wells Fargo U.S. dollar operating account, simplifying the maintenance of your foreign currency balances. u Eliminate unnecessary foreign exchange conversion and minimize your foreign exchange risk. u View balances online through Foreign Exchange Online and the Treasury Information Reporting (TIR) service available through the Commercial Electronic Office (CEO ) business portal. u Withdraw funds for payment through ForeignExchange Online, international ACH, or a linked Canadian checking account. u Receive competitive market rates for purchasing and selling foreign currency. 1 Deposits maintained in an MCA are held at a location outside of the U.S. As such, they are not eligible for federal deposit insurance. 16 Foreign Exchange Services

19 More Wells Fargo advantages u Open a multi-currency account with ease. u Avoid the complexities of opening and managing foreign bank accounts. u Hold 32 different currencies in your Wells Fargo accounts. u Receive detailed monthly activity statements. u Receive an integrated account analysis statement for your MCA and U.S. dollar accounts. Related services u Intraday wire detail reporting through the Treasury Information Reporting service u Foreign Exchange Online Available currencies for MCAs AED UAE Dirham** HUF Hungarian Forint AUD Australian Dollar JOD Jordanian Dinar** BHD Bahraini Dinar** ILS Israeli Shekel CAD Canadian Dollar INR Indian Rupee** CHF Swiss Franc JPY Japanese Yen CZK Czech Koruna KWD Kuwaiti Dinar** DKK Danish Kroner MAD Moroccan Dirham** EUR Euro MXN Mexican Peso FJD Fiji Dollar** NOK Norwegian Krone GBP British Pound NZD New Zealand Dollar HKD Hong Kong Dollar OMR Omani Rial** PHP Philippine Peso** PLN Polish Zloty QAR Qatari Rial** SAR Saudi Arabian Riyal** SEK Swedish Krona TRY Turkish Lira USD U.S. Dollar XPF Tahitian Franc** ZAR South African Rand **No interest available Foreign Exchange Services 17

20 Product solutions (cont.) Common questions about multi-currency accounts What is a multi-currency account? A multi-currency account (MCA) is a bank account, domiciled offshore, that allows you to hold foreign currency. An MCA allows you to make foreign purchases and receive income from foreign sales in non-u.s. dollar currencies. There is no need to convert foreign currency to U.S. dollars each time you receive a payment. You can allow these incoming funds to accumulate in your MCA and potentially appreciate, or you can use them to make foreign currency payments for overseas purchases. Wells Fargo s multi-currency accounts are domiciled at Wells Fargo s Grand Cayman branch. Why is the MCA domiciled at the Grand Cayman branch? Federal Reserve regulations prevent U.S. banks, such as Wells Fargo, from paying interest on commercial depository accounts held in the U.S. Wells Fargo has chosen the Cayman Islands as a location for its offshore accounts. Does Grand Cayman offer a respectable banking environment? Yes. Because of its business-friendly environment and close proximity to the U.S., Grand Cayman has nearly 700 licensed banks. Many U.S. and Canadian banks use the Grand Caymans to domicile funds. Why not license the MCA in the country of the underlying currency, such as the U.K. for pounds or Canada for Canadian dollars? Most countries require a physical banking presence within the country to domicile accounts there. Wells Fargo seeks to leverage technology to give you global access to your foreign funds, without the additional costs of opening and managing brick-and-mortar locations around the world. 18 Foreign Exchange Services

21 Does Wells Fargo guarantee the balances in my MCA? Wells Fargo does not guarantee any bank deposits, whether located in the United States or offshore. In the U.S., the FDIC protects certain account balances from bank default risk. There is no equivalent institution in the Cayman Islands, so deposits located in that country do not have similar protections. Since an MCA is an offshore account, do I receive tax benefits? For detailed information on tax implications, consult your relationship manager or tax accountant. Wells Fargo encourages you to consult with your own tax advisors on tax implications of MCAs. Available currencies for MCAs AED UAE Dirham** AUD Australian Dollar BHD Bahraini Dinar** CAD Canadian Dollar CHF Swiss Franc CZK Czech Koruna DKK Danish Kroner EUR Euro FJD Fiji Dollar** GBP British Pound HKD Hong Kong Dollar PHP Philippine Peso** QAR Qatari Rial** SEK Swedish Krona USD U.S. Dollar ZAR South African Rand HUF Hungarian Forint JOD Jordanian Dinar** ILS Israeli Shekel INR Indian Rupee** JPY Japanese Yen KWD Kuwaiti Dinar** MAD Moroccan Dirham** MXN Mexican Peso NOK Norwegian Krone NZD New Zealand Dollar OMR Omani Rial** PLN Polish Zloty SAR Saudi Arabian Riyal** TRY Turkish Lira XPF Tahitian Franc** *This is the current list of available currencies. New currencies will be considered based on local regulations, payment restrictions, possible operational issues, and customer demand. **No interest available In what foreign currencies is the account offered? Wells Fargo MCAs can be opened in the following currencies:* Foreign Exchange Services 19

22 Product solutions (cont.) Common questions about multi-currency accounts (cont.) How do I make deposits to and withdrawals from my MCA? u You can make deposits by: Purchasing a spot or forward foreign currency contract from your foreign exchange specialist or by using Wells Fargo s Foreign Exchange Online service a real-time, comprehensive foreign exchange system that provides fast, secure handling of your foreign currency transactions Having incoming foreign currency wire transfers credited to your MCA Depositing a foreign currency check (requires a foreign cash letter service arrangement) Combining a Canadian DDA and Canadian lockbox service with your MCA to have incoming payments made in Canada interface automatically with your account u You can make withdrawals by: Issuing foreign currency drafts and settling them to your MCA Sending wire transfers using the Foreign Exchange Online service Sending an international ACH payment file in foreign currency and settling it to your MCA How does a multi-currency account benefit my business? An MCA offers you greater convenience with all types of foreign currency transactions. You can deposit foreign currency receivables into an MCA without first converting the foreign currency into U.S. dollars. You can accumulate foreign funds to meet payable requirements. With foreign currency on deposit, you can negotiate prices in local currency without first performing a foreign exchange transaction. Negotiating in local currency helps your business to be more competitive in the countries where you are buying and selling. With foreign currency in your bank accounts, you can also assess the risk versus return of holding MCA balances for potential appreciation. Contact your Wells Fargo international treasury management officer for more information. 20 Foreign Exchange Services

23 What are the advantages of conducting business in local currency? Dealing in foreign currency can help you become more competitive in global markets. When selling overseas, pricing your product in foreign currency may make it more appealing to your buyers, because they can avoid currency conversion and associated risks. If you are buying rather than selling, negotiating in foreign currency can help you obtain a better price. Can I transfer funds to and from my MCA just as I do with my Wells Fargo U.S. dollar account? Transfer funds to or from your MCA, in the same currency, or transfer funds between your DDA and MCA, by executing the transaction using Wells Fargo s Foreign Exchange Online. Can I exchange one foreign currency for another within my MCA? Yes. You can exchange one foreign currency for another currency within your MCA at our current exchange rates. For what kinds of companies is a MCA most useful? Corporations transacting business internationally that find MCAs advantageous include: u Companies that buy and sell within the same foreign country u Companies that buy from one country and sell to another u Companies that maintain an overseas office u Foreign companies located within Wells Fargo s service territory in the U.S. that are engaged in international business Foreign Exchange Services 21

24 Product solutions (cont.) Common questions about multi-currency accounts (cont.) How do I open a Wells Fargo Multi-Currency Account? If your company currently maintains a Wells Fargo U.S. dollar account, contact your Wells Fargo relationship manager, international treasury management officer, or foreign exchange specialist to examine the benefits of opening an MCA. If you do not currently have a Wells Fargo U.S. dollar account, contact the nearest Wells Fargo Commercial Banking Office or call our international treasury management team at A member of the international implementation and customer service team will contact you regarding the documents required to open a MCA. Does a MCA account pay interest? Yes. Interest-bearing MCAs are required to maintain a minimum balance of U.S. $100,000 equivalent. A non-interest bearing MCA is available for customers not meeting this requirement. Can a MCA account be changed from non-interest bearing to interest bearing or vice versa after it is opened? No. If an existing account needs to be changed to an interest bearing or non-interest bearing account, the existing account must be closed and a new account number issued. What reports does Wells Fargo provide for my MCA? u Real-time balance reporting of customer activity is available on Foreign Exchange Online. u Intraday wire detail, intraday composite, and previous day statement reporting is available through Wells Fargo s Treasury Information Reporting (TIR) service, part of the Commercial Electronic Office (CEO ) business portal. u An end-of-the-month statement will be mailed, showing the entire activity for the month. 22 Foreign Exchange Services

25 How are MCA charges billed to me? Any applicable fees are billed through account analysis directly to your Wells Fargo U.S. dollar account. Can I direct incoming foreign ACH credits to my MCA? At this time, only Canadian dollar incoming ACH credits may be directed to your MCA and only in conjunction with a Canadian checking account. To receive payments in other currencies, you should direct the payor to send a wire. Will I need to fill out a Report of Foreign Bank and Financial Accounts (FBAR)/Form TD F ? Please consult with your tax advisor to determine if this requirement applies to you. For additional information on FBAR requirements, please visit the Internal Revenue Service web site at: Will I need to file a W-8/W-9 with the IRS for using an MCA? Each and every customer must file a W-8 or W-9 when using an MCA. Wells Fargo will send a 1099-INT form to the IRS and to all customers with MCA interest greater than U.S. $10.00 within the calendar year. The only exception is Wells Fargo will not send a 1099-INT to banks. If you file a W-8 as a Non-Resident Alien, we will not create a INT for you unless you are a Canadian individual and are using our interest-bearing CAD MCA. In this case, we will send form 1042-S to the IRS and you. Foreign Exchange Services 23

26 Product solutions (cont.) Fed-to-SWIFT Wells Fargo s Correspondent Banking Fed-to-SWIFT Wire Transfer Service allows Wells Fargo to act as your intermediary bank for processing your customers U.S. dollar international wire transfers. We offer a variety of pricing options, including a rebate service which allows you to receive additional revenue, since we share with you the service fees deducted on your customers transfers. And, with Wells Fargo, your customers transfers are processed in the most efficient and expedient manner, with no hidden charges. The experienced professionals in Wells Fargo s Global Correspondent Banking group will work with you to ensure that you and your customers are well taken care of. Three different pricing options 1. We deduct the processing costs from the principal of the wire and rebate a portion of the deduction to you. 2. We deduct the processing costs from the principal, with no charge to you. 3. We can charge your account with us for the processing costs, with no deduction to the principal. Please note that the pricing option chosen will apply to all wires. How you benefit u Flexible pricing options. Wells Fargo offers a variety of transparent, all-inclusive pricing tiers so you can select the one most suitable to your business. u Additional revenue stream with the rebate option. If you choose this option, Wells Fargo shares the fees deducted from customer transfers with you in the form of monthly hard-dollar credits to your account with us. 24 Foreign Exchange Services

27 u Detailed rebate reporting. If you choose the rebate option, Wells Fargo sends you a monthly report detailing the processed transactions and matching rebates. u Exceptional customer service. To expedite any investigation relating to wire transfers, we recommend you submit an inquiry using the same method as the original instructions. For example, when you submit the instructions by Fed wire, the inquiry should be submitted by Fed Inquiry. Superior wire operations u System capacity and contingency planning. Wells Fargo can process more than a half million wires daily with no queuing or waiting, and we have carefully implemented contingency plans for high reliability. u Error correction. We can repair incorrect or incomplete payment instructions. u Service quality and reliability. Wells Fargo s wire transfer service received A+ ratings in every category in the Phoenix-Hecht 2007 Middle-Market Quality Index TM survey of middle-market customers: Category Grade Timeliness of initiation and processing A+ Overall features and capabilities A+ Learn more For more information on Wells Fargo s foreign exchange services contact us at or fxservices@wellsfargo.com. Foreign Exchange Services 25

28 Product solutions (cont.) Offshore time deposits Wells Fargo gives you the opportunity to place excess cash in time deposits* held on the books of Wells Fargo Bank, N.A., Cayman Islands Branch. While it is important to be aware of the risks associated with international placements, time deposits allow you to diversify your holdings, which can reduce risk, create higher returns, and reduce volatility in your overall cash position. Advantages u No fees. u No DDA required for this service. u Potential reduction in portfolio volatility. Broadening your portfolio asset allocation to include international investing may help reduce overall portfolio risk and volatility. u Direct communication. Once you are set up as a customer, there is no need to work with an intermediary FX specialist to place deposits. Product requirements and specifications u Minimum deposit is $1 million for term deposits and $5 million for overnight deposits. u Maximum term: 30 days. u Cut-off time for same-day USD placements is 4:30 p.m. Eastern Time. u A W-8 or W-9 is required for IRS purposes prior to Wells Fargo accepting funds for deposit. u Deposits are not insured by the FDIC and are not considered deposits of Wells Fargo for purposes of insolvency. u Early terminations are subject to penalties. Learn more For more information on Wells Fargo s foreign exchange services contact us at or fxservices@wellsfargo.com. * These deposits are subject to additional risks, which may include economic and political instability and more volatile markets. The resulting currency fluctuations may create foreign exchange risk if the principal is to be converted to another currency at maturity. 26 Foreign Exchange Services

29 Vanilla option put long currency A put option is an agreement that gives the holder the right, but not the obligation, to sell an agreed amount of currency (the notional) at a set price (the strike rate) on some specified future date (the expiry). Similar to an insurance product, the protection comes at some stated cost (the premium), which must be paid to the option provider within two business days of the booking date (one business day for Canadian dollar options). Generally, the closer the strike rate is set to the spot rate on the transaction date (trade date), the greater the premium that must be paid. Vanilla options come in two formats or styles. A European-style option is only exercisable at 10 a.m. Eastern time on the expiry date, with the settlement of the transaction (the delivery date) following two business days later (one business day for Canadian dollar options). By contrast, an American-style option is exercisable on any business day up to and including the 10 a.m. cutoff of the option s expiration date. How you benefit u Customizable. The level of protection can be adjusted to match a desired level or to fit the hedger s budget. u Flexibility. There is never an obligation to deal when buying a put option. The option can easily accommodate uncertain exposures and delivery dates. u Protection. With a put option, the minimum value of a currency position can be determined in advance. If the underlying exposure fails to materialize, the maximum loss is the cost of the premium that has already been paid. u Potential cost savings. With a put option, the hedger always benefits from an improving market while minimizing the downside risk. Foreign Exchange Services 27

30 Product solutions (cont.) Vanilla option put long currency (cont.) How it works If long a particular currency, a put option gives the hedger the right to sell a specific quantity of currency for a set price at a set maturity date. The cost of this protection is determined by the desired level of protection, the tenor (term) of the transaction, the volatility of the currency markets, the interest rate differential between the two countries, and the spot exchange rate on the trade date. The right to purchase needed currency at the strike rate vests only after the premium has been paid. At expiry, if the spot rate is more attractive than the strike rate of the purchased put, the option will be considered out of the money. The right to sell will not be exercised. On the other hand, if the spot rate is less attractive than the strike rate, the hedge is in the money, and the holder will exercise the right to sell at the strike or guaranteed level. When exercising a vanilla option in a convertible currency, the holder can opt for true settlement (the needed currency is actually delivered by the option holder in exchange for the counter currency) or cash settlement (only the difference between the strike rate and the current spot market is paid to the option holder). User profile A vanilla put option may be suitable for those who: u believe a currency will increase in value but need protection in case it does not u have conditional or uncertain exposures that may not materialize u are willing to pay an upfront fee to be able to opt out of (walk away from) a contract u need a hedge that qualifies for hedge treatment under FAS Foreign Exchange Services

31 Example Problem: XYZ Company recently entered into a contract to sell a large machine to a customer in Italy. Under the terms of the agreement, XYZ will receive 1 million euros (EUR) in six months when the machine is delivered. XYZ is subject to exchange rate risk a weakening of the euro will decrease the dollars received from the sale during the six months leading up to the payment date. XYZ is convinced that the euro will strengthen over this time frame. While currency protection is desirable, losing the benefit of an improving currency market is not acceptable. So instead of booking a forward contract that would lock in the US dollar amount received, XYZ decides to buy a vanilla euro put option. If the market does improve, XYZ keeps all of the currency appreciation. Current conditions EUR spot Six-month forward EUR strike (ATMF) Notional (EUR) 1,000,000 Premium of notional 2.56% ($31,027) Outcomes at maturity: u Exchange rate rises. If the euro appreciates, to for example, on the expiry date, XYZ will allow the option to expire and will deal at the more favorable spot rate. u Exchange rate falls. If the euro depreciates, to for example, on the expiry date, XYZ will call Wells Fargo to exercise its right to sell 1 million euros at Foreign Exchange Services 29

32 Product solutions (cont.) Vanilla option put long currency (cont.) GMWB feature for income now USD value of 1 million EUR $1.30 $1.28 $1.26 $1.24 $1.22 $1.20 $1.18 $1.16 $1.14 $1.12 $1.10 l l l l l l l l l l l l l l l l l Spot rate at maturity Spot Forward Vanilla option Wells Fargo believes the above information and examples to be correct at the time given but makes no express or implied warranties. Such information and examples may not necessarily meet your requirements or fit your particular purpose or circumstances. Before engaging in any transaction, including those involving foreign exchange, you should contact your own tax and legal advisers. 30 Foreign Exchange Services

33 Vanilla option call short currency A Call Option is an agreement that gives the holder the right, but not the obligation, to buy an agreed amount of currency (the notional) at a set price (the strike rate) on some specified future date (the expiry). Similar to an insurance product, the protection comes at some stated cost (the premium), which must be paid to the option provider within two business days of the booking date (one business day for Canadian dollar options). Generally, the closer the strike rate is set to the spot rate on the transaction date (trade date), the greater the premium that must be paid. Vanilla options come in two formats or styles. A European-style option is only exercisable at 10 a.m. Eastern Time on the expiry date, with the settlement of the transaction (the delivery date) following two business days later (one business day for Canadian dollar options). By contrast, an American-style option is exercisable on any business day up to and including the 10 a.m. cutoff of the option s expiration date. How you benefit u Customizable. The level of protection can be adjusted to match a desired level or to fit the hedger s budget. u Flexibility. There is never an obligation to deal when buying a call option. The option can easily accommodate uncertain exposures and delivery dates. u Protection. With a call option, the maximum cost of a currency position can be determined in advance. If the underlying exposure fails to materialize, the maximum loss is the cost of the premium that has already been paid. u Potential cost savings. With a call option, the hedger always benefits from an improving market while minimizing the downside risk. Foreign Exchange Services 31

34 Product solutions (cont.) Vanilla option call short currency (cont) How it works If short a particular currency, a call option gives the hedger the right to buy a specific quantity of currency for a set price at a set maturity date. The cost of this protection is determined by the desired level of protection, the tenor (term) of the transaction, the volatility of the currency markets, the interest rate differential between the two countries, and the spot exchange rate on the trade date. The right to purchase needed currency at the strike rate vests only after the premium has been paid. At expiry, if the spot rate is more attractive than the strike rate of the purchased call, the option will be considered out of the money. The right to buy will not be exercised. On the other hand, if the spot rate is less attractive than the strike rate, the hedge is in the money, and the holder will exercise the right to buy at the strike or guaranteed level. When exercising a vanilla option in a convertible currency, the holder can opt for true settlement (the needed currency is actually delivered to the option holder in exchange for the counter currency) or cash settlement (only the difference between the strike rate and the current spot market is paid to the option holder). User profile A vanilla call option may be suitable for those who: believe a currency will increase in value but need protection in case it does not have conditional or uncertain exposures that may not materialize are willing to pay an upfront fee to be able to opt out of (walk away from) a contract need a hedge that qualifies for hedge treatment under FAS Foreign Exchange Services

35 Example Problem: ABC Company recently entered into a contract to purchase inventory from a supplier in Italy. Under the terms of the agreement, ABC will pay the supplier 1 million euros (EUR) in six months when the material is delivered. ABC is subject to exchange rate risk a strengthening euro would increase the US dollar cost of its imported material during the six months leading up to the payment date. ABC is convinced that the euro will weaken over this time frame. While currency protection is desirable, losing the benefit of an improving currency market is not acceptable. So instead of booking a forward contract that would lock in the cost of the purchased goods, ABC decides to buy a vanilla euro call option. If the market does improve, ABC keeps all of the cost savings. Current conditions EUR spot Six-month forward EUR strike (ATMF) Notional (EUR) 1,000,000 Premium of notional 2.60% ($30,992) Outcomes at maturity: u Exchange rate falls. If the euro depreciates, to for example, on the expiry date, ABC will allow the option to expire and will deal at the more favorable spot rate. u Exchange rate rises. If the euro appreciates, to for example, on the expiry date, ABC will call Wells Fargo to exercise its right to buy euros at Foreign Exchange Services 33

36 Product solutions (cont.) Vanilla option call short currency (cont) GMWB feature for income now USD value of 1 million EUR $1.30 $1.28 $1.26 $1.24 $1.22 $1.20 $1.18 $1.16 $1.14 $1.12 $1.10 l l l l l l l l l l l l l l l l l Spot rate at maturity Spot Forward Vanilla option Wells Fargo believes the above information and examples to be correct at the time given but makes no express or implied warranties. Such information and examples may not necessarily meet your requirements or fit your particular purpose or circumstances. Before engaging in any transaction, including those involving foreign exchange, you should contact your own tax and legal advisers. Learn more For more information on Wells Fargo s foreign exchange services contact us at or fxservices@wellsfargo.com. 34 Foreign Exchange Services

37 Unparalleled support Please click here to meet our team of relationship managers We offer product knowledge, hands-on experience, and dedication to your business. For our relationship managers and customer service officers, serving you is their measure of success. Through Wells Fargo s Foreign Exchange Service team, you ll receive dedicated 24-hour support for foreign exchange applications, complimentary training, and ongoing support. Customer support contacts Foreign Exchange Services: Phone: fxservices@wellsfargo.com Foreign Exchange Online: Phone: Fax: fxolsales@wellsfargo.com Foreign Item Processing: Phone: Fax: forchkpr@wellsfargo.com Foreign Currency: Phone: , option 2 Foreign Exchange Services 35

38 wellsfargo.com 2010 Wells Fargo Bank, N.A. All rights reserved. Member FDIC. ECG