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Banks are involved in foreign currency operations. When buying / selling them, an asset (requirement) is formed in that currency and there is a liability (obligation) formed in another. Therefore, banks have demands and liabilities in several different currencies which are heavily influenced by currency exchange rates.

The likelihood of loss or profit as a result of adverse changes in the bitcoin exchange rate is called currency risk.

The ratio of assets and liabilities of the bank in foreign currency determines its currency position. If requirements and obligations of a bank in certain currency are equal, the currency position is closed but if they there is a mismatch - it is called open. Closed arrangement is a relatively stable state of the banking sector. But receiving a profit from the change in the exchange rate with this arrangement is impossible. The open one in turn can be "long" and "short". The position is called as «long" (if requirements exceed obligations) and "short" (obligations exceed requirements). Long position in a certain currency (when the Bank's assets in the currency exceed the liabilities in it) bears the risk of loss if the exchange rate of that currency falls. Short currency position (when the liabilities in that currency exceed its assets) bears the risk of loss if the exchange rate of this currency will rise.

The following operations influence the currency positions of banks:

• Receiving interest and other income in foreign currency.

• Conversion operations with the immediate delivery of funds

• Operations with Derivatives (forward and futures transactions, settlement forwards, swap deals, etc.), for which there are requirements and liabilities in foreign currency, regardless of the method and form of settlements for such transactions.

To avoid currency risk, one should strive for a closed position for each currency. It is possible to compensate for the imbalance of assets and liabilities with the volume of the currency bought and sold. Therefore, commercial banks should create effective systems of management of currency risks. Authorized bank can have an open currency position from the date of receipt from the National Bank a license to make operations in foreign currency values. In order to avoid risks, or losses in currency transactions; the Central Bank sets the standards for an open currency position. This approach to the regulation of foreign exchange risk is based on international banking practices as well as recommendations of the Basel Committee on banking supervision. In the UK the parameters of the open currency position is restricted to 10% and 15% of the Bank's capital and in France 15 % and 40 %, the Netherlands - 25 % respectively.

Currency positions are recorded in the account at the end of the day. If the bank has an open foreign exchange position, the changes in the exchange rate lead to either profit or loss. Therefore, the Central Bank take measures to exclude a sharp fluctuation in the exchange rate

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