News & Press - Tuesday, March 16, 2010 21:00 - 0 Comments

Bankers and City workers – rush to fix exchange rate for bonuses, salary and vested stock

The start of 2010 saw the usual influx of bankers and City workers converting or hedging their bonuses, proceeds from vested stock and salary payments from foreign currencies into sterling or vice versa.

In order to assist bankers and City workers, World First representatives handed out free dollar bills to those arriving at work. Attached to the dollar bills were flyers outlining tips on how they can best manage their foreign currency exposure resulting from bonus, salary and proceeds from stock paid in foreign currencies.

Elisabeth Dobson, head of private clients at World First said, “At the start of each year we speak to many bankers who know they will receive a cash bonus or proceeds from vested stock in a foreign currency and need to convert it into another currency. For example, a number of US banks  will pay some cash bonuses and issue stock in US dollars and some European Banks will pay bonuses and issue stock in euros. Staff based in the  UK will choose to convert these into sterling and will look to hedge their exposure to exchange rates using forward contracts and currency options. Equally we have a large number of clients converting their salary payments to countries outside the UK or they might receive their salary in euros or dollars and will look to convert this into sterling.”

The beginning of the year is typically when annual bonuses are announced and when those with vested stock can decide whether to exercise and cash in their stock from previous years’ bonuses. It is usually between January and March that employees will receive their cash bonuses or have the right to exercise their vested stock.

Elisabeth added, “Many bankers have been keen to talk about our currency option structures.  They are like forward contracts, in that you can secure an exchange rate now for a date in the future, but they also allow you to benefit from any improvement in the rate.”

As well as bankers and City workers looking to convert US dollars and euros we have also had a larger number of clients who receive sterling bonuses looking to invest overseas, buy a second home or holiday home, pay off an overseas mortgage or convert and send funds back to their country of origin if they are living in the UK.

For more information on hedging salary or bonus payments click here: worldfirst.com/bonus