Risk Management Manual of Examination Policies - FDIC

INTERNATIONAL BANKING Section 11.1
Blocked Exchange – Exchange which cannot be freely
converted into other currencies.
Brady Plan – Proposed in 1989 and named after then U.S.
Treasury Secretary Nicholas Brady, the Brady Plan sought
to reduce the debt-service requirements of various
developing countries and to provide new loans (Brady
bonds) to service existing obligations.
Break-even Exchange Rate – The particular spot
exchange rate that must prevail at the maturity of a deposit
or debt in a foreign currency, which has not been covered
in the forward market, so that there will be no advantage to
any party from interest rate differentials.
Bulldog Bonds – British pound sterling denominated
foreign bonds issued in London.
Boycott – An organized ban on the purchase of goods or
services of a particular country or company for political or
economic reasons. Bankers need to remain cognizant of
the Export Administration regulations addressing
restrictive trade and boycotts.
Buyer’s Option Contract – When the buyer has the right
to settle a forward contract at his or her option any time
within a specified period.
Buying Rates – Rates at which foreign exchange dealers
will buy a foreign currency from other dealers in the
market and at which potential sellers are able to sell
foreign exchange to those dealers.
Cable – A message sent and delivered by an international
record carrier via satellite or cable connections to a foreign
country. “Cable” also includes messages transmitted by
bank telex. The terms “cable” and “telex” are generally
used interchangeably.
Capital Controls – Governmental restrictions on the
acquisition of foreign assets or foreign liabilities by
domestic citizens or restrictions on the acquisitions of
domestic assets or domestic liabilities by foreign citizens.
Capital Flight – A transfer of investors’ funds from one
country to another because of political or economic
concerns about the safety of their capital.
Cedel – One of two main clearing systems in the Eurobond
market, Cedel, based in Luxemburg, began operations in
1971 and established Cedel Bank, a clearing bank
chartered in Luxemburg.
Central Bank Intervention – Direct action by a central
bank to increase or decrease the supply of its currency to
stabilize prices in the spot or forward market or move them
in a desired direction to achieve broader economic
objectives (i.e. weaken currency to a given point in order to
boost export activity). On occasion the announcement of
an intention to intervene might achieve the desired results.
Certificate of Inspection – A document often required for
shipment of perishable goods in which certification is made
as to the good condition of the merchandise immediately
before shipment.
Certificate of Manufacture – A statement, sometimes
notarized, by a producer who is usually also the seller of
merchandise that manufacture has been completed and that
goods are at the disposal of the buyer.
Certificate of Origin – A document issued by the exporter
certifying the place of origin of the merchandise to be
exported. The information contained in this document is
needed primarily to comply with tariff laws that may
extend more favorable treatment to products of certain
countries.
Chain – A method of calculating cross rates. For example,
if a foreign-exchange trader knows the exchange rate for
German marks against U.S. dollars and for French francs
against U.S. dollars, the “chain” makes possible the
calculation of the cross rates for German marks against
French francs.
Charter Party – A contract, expressed in writing on a
special form, between the owner of a vessel and the one
(the charterer) desiring to employ the vessel setting forth
the terms of the arrangement such as freight rate and ports
involved in the trip contemplated.
Clean Collection – A collection in which a draft or other
demand for payment is presented without additional
attached documentation.
Clean Draft – A sight or time draft to which no other
documents such as shipping documents, bills of lading, or
insurances certificates are attached. This is to be
distinguished from a documentary draft.
Clean Risk at Liquidation – A type of credit risk that
occurs when exchange contacts mature. They may be a
brief interval (usually no more than a few hours) during
which one of the parties to the contract has fulfilled its
obligations, but the other party has not. During this period,
the first party is subject to a 100 percent credit risk, on the
chance that, in the interval, an event may prevent the
DSC Risk Management Manual of Examination Policies 11.1-33 International Banking (12-04)
Federal Deposit Insurance Corporation