That is 'the Hara-kiri Exchange' Information:
Hara-kiri exchange - an interest rate or the exchange of cross currency deprived of profit potential for the founder. The term became popular in the 1980th when Japanese banks and brokers were offers very attractive rates to receive business from mainly foreign companies. In Japan a hara-kiri - a form of slow ritual suicide. Exchanges were called a hara-kiri because not receiving profit on these types of transactions was considered as financial suicide.
2019 - Hara-kiri exchange
Hara-kiri exchange, Information - 2019
Destruction of 'hara-kiri exchange' Information:
Exchanges of a hara-kiri don't provide internal advantages to the parties which offer them, but there are external advantages to consider. The offer of an attractive exchange to the large company can induce them to deal with your bank. It could open opportunities to get profit in other place, including signing of new problems, credits, bank collecting, insurance policies, and the list proceeds. Danger to the party of the offer consists that skilled investors exploit a hara-kiri exchange, without providing profitable business in other place.
As hara-kiri exchanges work
The hara-kiri exchanges work as other currency or percentage swaps. Distinction - that with a hara-kiri exchange, the level offered by the founder is more attractive, than that is available in the market. For example, the founder of an exchange can offer payments of higher interest rate to other party, than that offer other banks, or they can offer more attractive exchange rate on currencies. Such actions reduce the size of profit of bank, doing it less possibly they will get profit or will benefit directly by the transaction.
Such exchanges - sold on a counter (OTC), and in this case often directly sold by bank or broker activity to potential clients. With transactions of OTC of the party can settle terms which they want from an exchange. Thus the founder could establish the maximum and minimum rates which they will pay/receive, in essence guaranteeing that other party will leave even (the worst case) or forward (the best case) on an exchange. With the fluctuating exchange rates and interest rates and potentially huge sums of money involved in these typically established transactions if the markets go the wrong way, it could mean big losses or missed profit potential for bank or the broker.
Exchanges of a hara-kiri were the most popular in the connected exchanges of Japanese yen. Their popularity decreased as Japanese banks extended to Europe and therefore any more the foreign companies shouldn't try have to tempted to be engaged in business in Japan. Besides, the Japanese stock market started suffering crash at the beginning of the 90th, having placed tension on banks and economy.
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