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Poland examines its options

The weeklyFiX was sent a note this week saying that the Polish government was discussing a new regulation that would result in the cancellation of currency options transactions written by some of the country’s exporters. The news, first mooted back in December caused quite a sharp move in EUR/PLN. It also rekindled memories of the debacle in Russia in 1998, when a dodgy Micex fixing resulted in many Western banks having to wear losses when they thought they should be booking profits.

Commerzbank’s Ulrich Leuchtmann describes the plans as worrying: “Polish exporters in the past regularly hedged their future EUR incomes against a PLN appreciation. Now, most of these hedges are producing losses. Some of these transactions allegedly were done without informing the customers about potential risks. While it is certainly true that a bank that violated rules about the duty to inform should be punished. But such issues normally should be regulated by courts on a case-to-case basis. Putting all banks that offered such hedging strategies under general suspicion and cancelling trades without a case-by-case check would be an act that would undermine the confidence of foreign investors in the basic principles of contract certainty.

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