Crédit Agricole to launch two-year forwards by Q2

An outright forward contract is an agreement to buy or sell a specific amount of currency at a future date for a pre-determined rate, usually to hedge against currency fluctuations.

The new contract has been in testing phase at Crédit Agricole since mid-January and will be available globally in G-10 currencies with streaming prices. Leclercq declined to comment on how many clients have been testing the new contract, but said it is likely to appeal to corporates.

"Jetstream, the bank's electronic foreign exchange trading platform, currently offers one-year forwards, spot FX, plain vanilla options and dual currency deposits. The demand for this new product is mainly coming from corporates, for longer-term hedging purposes," said Leclercq.

Crédit Agricole recognises changes might need to be made to the way in which two-year forwards are processed as a result of evolving regulations for over-the-counter derivatives. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, FX swaps and forwards fall within the scope of mandatory clearing requirements, although the US Department of the Treasury has the authority to exempt the asset class.

The US Treasury is expected to reach a conclusion on the treatment of FX before July, and European legislators have said they will follow the same path as the US. But according to senior officials in both the European Commission and the European Parliament, a full exemption has not been discussed and FX contracts of longer maturities should be subject to mandatory clearing.

Leclercq acknowledged the possibility of a clearing requirement for the new contracts, but said the decision to offer two-year forwards had been made before the new regulations became clear. "The subject of clearing was not our concern when we started the development. We will adapt accordingly when the regulations take effect," he said.