Currency conversion

Conversion: exchanging one currency for another at an exchange rate. When a Russian company pays a foreign supplier, the roubles have to be turned into the contract currency: yuan, dirhams, lira, rupees, dollars or euros. The conversion is carried out by a bank or a payment agent.

How it works

If you pay yourself, the bank sells you currency at its own rate, and you transfer it to the supplier from your foreign currency account. If you pay through an agent, you transfer roubles, and the agent buys the currency and sends it to the beneficiary.

Sometimes there is more than one conversion: roubles are exchanged into an intermediate currency, and that currency into the beneficiary’s currency. This is a cross-currency transaction, and each link adds its own spread.

What the rate depends on

Benchmarks: the exchange or interbank rate at the time of the deal and the official Bank of Russia rate. The client rate differs from the benchmark by the markup. Its size depends on the currency, the amount, liquidity on the route and urgency. In rare currencies and on small amounts, the markup is usually higher.

What to watch for

• The rate must be written down before the roubles are debited. A rate “on the execution date” shifts the risk of rate movements during the payment onto you.
• Compare the total, not the rate and the fee separately: how many roubles it took to get the required amount of currency.
• Ask how many conversions there are in the chain and in which currency the money will reach the beneficiary.
• If the payment currency differs from the contract currency, the contract must provide for this.

When VEDmost arranges the payment, the rate and the fee are written in the payment order for each payment before the roubles are debited. To compare your current rate: Compare your rate.