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In today’s world, both business & financial risk are linked to each other. As for significant risk of loss/
uncertainty & excessive volatility of Foreign Currencies/ traditional products/instruments in the
Financial Market, Islamic Financial Products are becoming fast darling in the Global & Local banking
industry attracting Muslims and non Muslims due to Risk sharing, ethical provision and non interest
policies.
Today’s financial institutions engage in activities starting from merchant transactions (import, export and
remittance) to complex derivatives involving basic foreign exchange complex structured/customize
products. in order to aggregate & minimize the foreign exchange risks at a single department and to bring
expertise in such functions a separate Division is established namely as Treasury Division. The Forex
Treasury usually consists of DEALERS (Officials appointed/engaged in doing transactions with other
Banks/Clients) under Chief Dealer(s) and the Head of this Treasury Division is called TREASURER.
However, each transaction initiated by dealers is called as “DEAL”.
Both parties must take possession of the counter values before dispersing, such
possession being either actual or constructive
The counter values of the same currency must be of equal amount, even if one of them is
in paper money and other is in coin of the same country, like a note on one pound for a
coin of one pound
The contract shall not contain any conditional option or deferment clauses regarding the
delivery of one or both counter values
The dealing in currencies shall not aim at establishing a monopoly position, nor should it
entail any evil consequences to the interest of individual or societies.
It is permissible for the institution to hedge against the future devaluation of currency by
recourses to -back to back interest free loans and the exposure is account payable.
Execution of trade by appointing agent to execute the contract.
It is also permissible to execute deals on bilateral exchange in settlements of the two
debts which is called as AL MUQASAH (Set off/netting arrangement)
Forex Treasury Set UP:
Treasury Product Spot Foreign Exchange transactions(date of deal plus Two working day
= date of settlement)
Principle Bai –as sarf (Spot under Hukmi –eadin –biaden i.e. and to hand)
Functions/activities • Merchant transactions
o Pricing & settlements of import, export & remittances
related fund based transactions.
o Allowing Special Rates to Valued Clients.
o Attraction/Induction of Other Banks/Inter-Bank
Corporate
o Sale/buy currencies to/from Loca Inter-Bank l Market.
• Trading in Currencies in Global Markets.
• Overseas Investment of Customers Funds with IDB.
Market analysis • Foreign Exchange Market
• Money, Stock & Commodity Market.
• Central Bank behavior