1. Foreign-Exchange Policy Objectives
Guideline 1
The policy document must state the departmentâs foreign-exchange policy objectives.
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Each department is required to produce a policy document for the management of their transaction exposure so that this exposure is covered in a systematic way. Chief Executives are responsible for the development and implementation of their departmentâs policies.
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The policy document must contain the departmentâs policy objectives. Consistent with the Crownâs approach to risk, these objectives should include the following:
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to minimise transaction exposure by covering all material foreign-exchange exposures as soon as they arise, with approved instruments and counterparties;
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to minimise counterparty exposure by establishing the criteria for acceptable transaction and bank account counterparties and limiting the amount of exposure to any single counterparty; and
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to ensure that the policies and practices comply with the Public Finance Act 1989 and the Guidelines for the Management of Crown and Departmental Foreign-Exchange Exposure.
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Departments may also choose to include other objectives relating to how they specifically manage their foreign-currency transactions and/or banking arrangements.
2. Foreign-Exchange Exposure faced by the Department
Guideline 2
The policy document must describe the types of foreign-exchange exposure faced by the department.
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Transaction exposure is the principal type of foreign-exchange exposure which departments face (refer to paragraph 8 for a definition of this).
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The scale and type of the foreign-exchange exposure faced by a department will vary depending on the nature of the departmentâs operations. Examples of departments with foreign-exchange exposures and foreign-currency bank accounts include those which:
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have personnel based overseas;
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are responsible for administering foreign-currency receipts or payments on behalf of the Crown e.g. pensions, child support; and
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acquire capital assets from overseas.
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The policy document must describe the types of foreign-exchange exposure faced by the department.
