Your browser does not support JavaScript! Pls enable JavaScript and try again.
Loan Currency Switch

Loan Currency Switch

Diversify your loan portfolio currency and utilize global market opportunities.

A loan currency switch offers leverage clients the possibility to book cross currency loans and to convert their loan currency.

How does it work?

The currencies offered are USD, EUR, GBP, JPY, CHF, CAD and AUD.

Hypothetical example for illustration purposes only and not indicative of actual and/or future performance:

Let's say you have a loan currently denominated in USD for USD 100,000 and would like to switch the currency of the loan to Japanese Yen (JPY) currency.

  • Initial currency: USD
  • Target currency: JPY
  • Initial Loan: USD 100,000
  • JPY interest rate lower than USD interest rate

The immediate benefit upon switching to JPY loan is a saving on the loan interest as JPY currency loan carries a lower interest rate compared to USD currency loan.

Given that you now have a cross currency exposure, you would be looking for the target currency to depreciate vis a vis the initial currency so that when you switch back to USD, you reduce your outstanding USD line.

In scenario 1, the target currency (JPY) depreciates vis a vis the initial currency (USD). When you switch back from JPY to USD, this will reduce your outstanding USD line from USD 100,000 to USD 97,222.

In scenario 2, the target currency (JPY) appreciates via a vis the initial currency (USD). When you switch back from JPY to USD, this will increase your outstanding USD line from USD t100,000 to USD 101,942.

 

 

Scenario 1: Target currency depreciatesInitial loan (USD)USDJPY RateTarget loan (JPY)
Initial Swap from USD to JPY100,000.00

105.00

10,500,000
Swap exit from JPY to USD97,222.22108.0010,500,000
USD line decrease2,777.78

 

 

Scenario 2: Target currency appreciatesInitial loan (USD)USDJPY RateTarget loan (JPY)
Initial Swap from USD to JPY100,000.00

105.00

10,500,000
Swap exit from JPY to USD101,941.75103.0010,500,000
USD line increase1,941.75

Important Information:

  • When a client initiates a transaction of converting his holdings from his Currency into another currency, he runs the risk of the other Currency depreciating, thus leading to a reduction in assets in the home currency. Similarly, when a client converts a liability from one currency to another, he runs the risk of the resultant Loan CCY appreciating leading to a higher liability when converted back to the original currency.
  • We would like to remind you that if the new loan currency appreciates against your original loan currency, you may suffer a loss, even if the interest rate on the new loan currency may be lower.

 

Disclaimer:

  • Please take note that that foreign currency investments are subject to rate fluctuations which may provide you both opportunities and risks. You may experience a loss when you convert foreign currencies. Exchange controls may be applicable from time to time to certain foreign currencies. You should therefore determine whether any foreign currency investment is suitable for you in the light of your investment objectives, your financial means and your risk profile.
  • Loan currency switch is available to IR5 and IR6 Citigold and Citigold Private clients only
  • The Facility denominated in the Converted CCY shall be governed by same Terms & Conditions and other related security documentation executed in favour of the Bank for the Original CCY Facility.
  • Please note that for x-currency lending, a 10% haircut applies to the prevailing Loan To Value (LTV) ratios when the loan and collateral currencies are not the same.
  • The loan will continue to be subject to margin call and you may be required to top up your Collateral if there is insufficient Collateral assigned to your loan at all times.
  • You will pay Citibank interest on any utilization of the Leverage Facility and/or the Overdraft Facility at the rate for the respective facility currency, which is the sum of the Margin and the monthly base rate for the respective facility currency as determined and announced from to time by Citibank with reference to the relevant interbank market rate ("Reference Rate") and if that rate is less than zero, the Reference Rate shall be deemed to be zero. In the event the Reference Rate is unable to be determined by Citibank for whatever reasons (whether or not due to market disruption) or the Reference Rate does not represent Citibank’s cost of funds, Citibank shall be entitled to adopt a substitute basis for determining the rate of interest and notify the same to you.
  • The FX rate and initial and target loan values will be confirmed to you on a recorded call back before the loan currency swap processing. Please note that if you decide to cancel your instructions after confirming the foreign exchange rate, you may incur a loss should the rate move adversely when bank cancels the FX position on your behalf
  • The call back to clients for loan swap is restricted to working days, Mondays – Thursdays. Settlement of the loan may take up to next working day. During this time, the client may be liable for accrued interest in the source currency.
  • In the event of market volatility, Citibank N.A., UAE has the right to unilaterally cancel any swap transaction requested for by the Client without notice, notwithstanding the Client instructions to book the swap transaction.
  • Client acknowledges the above risks and confirms his understanding of FX Loan Swap. Client also acknowledges that Citibank will not be in a position to advise on the loan swap transaction or verify its suitability for the client. Client understands and accepts the above risks and based on such understanding chooses to proceed.
  • Client hereby acknowledges that the loan currency conversion facility is not to serve speculative purposes.