With Risk Reversal we help the Exporters to protect the value of their position or prevent their loss with the expectation that the exchange rate will fall / rise below a certain level.

What is Risk Reversal?

Refers to commercial transactions that can be used to protect the value of the foreign currency position or to prevent loss with the expectation that the exchange rate will decrease/rise to a certain level.

What is the Product’s purpose?

The exporter, who expects the exchange rate to stay in a certain band during the maturity period, provides a certain amount of protection against exchange rate volatility without cost. If the exchange rate falls outside the determined band at the end of the maturity date, the Exporter will have to trade at a lower/higher exchange rate than the market conditions.

What currencies can be used for the transaction?

Currencies subject to Risk Reversal transactions are Turkish Lira, US Dollar, Euro, British Pound, Japanese Yen and other currencies to be decided by the Treasury Department.

What are the Maturity and Transaction Limits?

Exporter’s maximum derivative trading limit is limited to 50 percent of the general limit allocated to the exporter, or to 25 million US Dollar whichever is less.

The minimum transaction amount that the exporter may request for a Risk Reversal transaction is 20,000 US Dollar and equivalent currencies.

The maturity of Risk Reversal transactions is 360 days at most.

Between which hours can the transaction be made?

Risk Reversal transactions can be made between 09:30-15:30. The transaction maturity can not be on official holidays for the currencies concerned.

What is the cost?

No transaction fee or commission will be paid to the Bank for the Risk Reversal transaction. The transactions are made by collateral.


To make a transaction or for further information; You can contact us at 0850 666 5631 or 0850 666 5638.

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Frequently Asked Questions

Who can benefit from Risk Reversal Transactions?

In order to benefit from the Risk Reversal Transaction;

It is required that the Exporter’s firm information is held within the bank, a “General Loan Contract” is signed between the Exporter and the Bank and that the necessary collateral have been established within the Bank,

A “Derivative Products Framework Contract” and the “General Risk Notification Form” and the “Over-the-Counter Derivative Transactions Risk Notification Form”, which are annexes to this contract must be signed between the Exporter and the Bank and the Compliance Test must be filled.

How to apply?

The Exporters which currently have their firm information within our Bank;

Must sign the “General Loan Contract”, and following the derivative transaction limit allocation; along with the “Derivative Products Framework Contract” and the “General Risk Notification Form” and the “Over-the-Counter Derivative Transactions Risk Notification Form”, which are annexes to this contract, signed in 2 copies, authorized signatory lists with notary certification belonging to the individuals who are authorized to represent and bind the company and that have their signatures on the contract must be delivered to the Treasury Operation Directorate by hand and/or via mail-courier.

What is the collateral?

Since the risk of not fulfilling the exporter’s obligation in Risk Reversal Transactions is not guaranteed, there is loan risk for the Risk Reversal contracts. The Bank requests initial collateral from the Exporter for this risk.

In determining the TL equivalent of the collateral amounts that will be established, Türk Eximbank’s currency buying rates will be used. For the related transactions, within the derivative transaction limit, separate collateral will be established for each transaction. Each transaction’s maturity is limited to 10 days prior to the maturity of the collateral provided. The initial and maintenance collateral level is determined by the Head Office on transaction basis.

What is the Initial and Maintanence Collateral?

The amount that must be provided by the Exporter as collateral for the Bank to make a Risk Reversal transaction is the initial collateral. Maintanence collateral is the lowest level at which the

Day Count

Initial Margin

For FX-TL

Maintenance Margin

For FX-TL

Initial Margin

For FX-FX

Maintenance Margin

For FX-FX

Up to 30 Days

25%

12,5%

6%

3%

31-90 Days

30%

15%

6%

3%

91-180 Days

35%

17,5%

6%

3%

181-360 Days

40%

20%

6%

3%

initial margin can be decreased as a result of the exchange rate fluctuations in the market during the period of the exchange rate Risk Reversal process.

 

 

What Collateral Types Are Accepted?

  • Bank Definite Guarantee Letters,
  • Cash Pledge
  • Securities issued by countries rated as Country Risk Rating Aa1 and higher by Moody's,
  • T.R. Securities issued by the Ministry of Treasury and Finance in the country and abroad,
  • Securities issued by Turkey Export Credit Bank A.Ş.
  • Securities issued by T.R. Ziraat Bankası A.Ş, Akbank T.A.Ş, T. Garanti Bankası A.Ş, T. İş Bankası A.Ş, T. Sınai Kalkınma Bankası A.Ş. and Yapı ve Kredi Bankası A.Ş.,
  • or other collateral types that the Bank deems appropriate are acceptable.

What is the margin call?

In case the total collateral held in the account of the exporter falls below the maintenance collateral, the exporter is required by the Bank to complete the amount of the collateral at the initial collateral level. This request is named as “Margin Call”.

What to do in Risk Reversal Transaction Date?

  • The Exporter whom a derivative limit is allocated and collateral is established sends the “Transaction Form” that includes the related conditions and signed by the individual(s) authorized to represent the firm.
  • Upon execution of the transaction, the necessary initial collateral amount is blocked and reduced from the collateral amount provided by the Exporter.
  • Following the blockage of the collateral amounts, the Exporter does not have the right to renege on the transaction or the right to change the transaction. The Bank reserves the right to reduce the transaction amount.
  • The bank confirms the transaction result with the forward transaction receipt which will be sent to the Exporter on transaction day.
  • The exporter sends the Risk Reversal Transaction Receipt to the Bank by writing “Notified and Accepted” to the Risk Reversal Transaction Receipt signed by the individual(s) authorized to represent the firm.
  • After the bank has sent the original forward transaction receipt to the address of the Exporter within 5 (five) business days at the latest from the transaction date, The Exporter delivers the wet-signed original of the forward transaction receipt by mail or courier within 5 (five) business days to the bank.

What to do during Risk Reversal Transaction Process?

  • In case the exporter reneges on the Risk Reversal transaction before the transaction date for any reason, the transaction is unilaterally assessed by the Bank according to the current market conditions, and the amount of penalty determined by the Bank on the basis of market conditions is collected from the relevant collateral of the Exporter.
  • As a result of daily valuation, if there is profit in terms of the exporter, there is no change in the collateral amount.
  • As a result of daily valuation, if there is loss in terms of the exporter, and the amount of the loss incurred does not fall below the level of maintenance collateral determined by the Head Office, a margin call will not be made.
  • As a result of daily valuation, if there is loss in terms of the exporter, and the amount of the loss incurred falls below the level of maintenance collateral determined by the Head Office, the collateral level will be increased to the initial collateral amount.
  • If the exporter does not comply with the margin call within 2 (two) business days, the default principles will go into effect and the exporters’ collateral will be compensated.

What to do on Risk Reversal Transaction Maturity?

  • Foreign exchange rates to be used in cash settlement are determined by the Bank at 12:00 London time on the maturity of the transaction and the Bank’s determined rates are announced on the internet site or directly to the customer.
  • Risk reversal transaction consists of 2 option transactions. At the end of the maturity, the Bank or the Exporter must notify the other party that they will exercise their option right according to the market conditions.
  • In case the Bank wishes to exercise its option right, the Exporter has to fulfill its obligation arising from the option it has sold. If the exporter wishes to exercise its right arising from the option purchased, the Bank will fulfill its obligation.
  • Following the exporter's fulfillment of its obligation on the due date, based on the transaction amount and exchange rate determined in the "Risk Reversal Transaction Receipt", the Bank fulfills its obligation on the nearest transaction day, depending on whether the relevant currencies are within the transaction hours. Liabilities are fulfilled on the same day for TL transactions, the next business day for USD, EUR and GBP transactions, and 2 business days for JPY transactions.
  • If the obligation is not fulfilled, the collateral is not released. If the Exporter does not fulfil the obligation untill the stated time, the default principles will go into effect and the exporter’s collateral will be compensated.

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