Following the rise in cross-border payments, Bank of America on Sunday introduced guaranteed exchange rates for up to one year, the longest term available in the industry.
The growth of e-commerce businesses, services, manufacturing and the gig economy has led to a sharp increase in both the volume and value of cross-border payments in recent years.
Long-term guaranteed fixed rates enable corporate treasuries to enhance financial stability, optimize liquidity and align cash management practices with overall corporate strategy. It offers predictable returns, stable cash flow, interest rate protection and long-term liquidity planning.
“When foreign exchange risk is managed appropriately and effectively, it can provide enormous benefit to companies that process large volumes of cross-border payments,” said Bhupen Velani, head of transactional foreign exchange trading in global markets at Bank of America. “As our clients’ business models have evolved, these volumes have increased, as has the appeal of locking in exchange rates over longer periods.”
Eight years ago, BofA launched guaranteed exchange rates beyond a 24-hour period, supporting more than 200 currency pairs. One-year term is available in 37 currency pairs.
Daniel Stanton, head of foreign exchange transaction services at Bank of America’s Global Payments Solutions, says that for corporate treasurers, volatile foreign exchange markets exacerbate the challenge of forecasting cash flows. “Providing guaranteed exchange rates over a longer period of time can help them improve forecasting, leading to more informed decision making.”
By forecasting cash inflows with greater accuracy, it allows for better budgeting and financial planning. With fixed income, treasury departments can strategically manage cash reserves, deciding when to use excess cash and when to maintain liquidity for operational needs. Guaranteed rates also enable treasurers to align cash management strategies with long-term corporate financial goals, optimizing the use of excess cash for strategic investments.
Guaranteed currency exchange rates can be obtained by BofA clients through the CashPro platform and via SWIFT without any additional technological changes.
Long-term guaranteed fixed savings rates can be mutually beneficial, creating stability for both corporations and banks in a volatile economic environment. While they may not offer the same returns as some of the riskier foreign exchange products, the stability they provide makes them an attractive option.