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Lesson 42 of 42 · Part Q · Level 2 · Explained

Foreign currency-Taka swaps: safeguards, use of the Taka and zones

The rules that keep FC-Taka swaps safe: only against available and unencumbered dollars the exporter owns, the bank's controls, the exporter's written declaration, not a loan, Taka only for export working capital and never for speculation, proper records and reports, and swaps for zone enterprises too.

Q-5Q-6Q-7Q-8

In Lesson 41, Foreign currency-Taka swaps: what they are and how long they run, Evelyn learned how a swap gives her Taka today and her dollars back on an agreed date, for no longer than her dollars are expected to wait.

Now she has the Taka, and an idea. "My cousin says I should use the swap money to buy a little land near the highway," she whispers to Eliana. "Prices are going up. Then I return the money in three weeks and keep the profit." Mehnaz, the finance manager of the Type A sweater factory from Lesson 40, is at the next chair. "And can a zone factory like ours do these swaps at all?"

Eliana calls in Mithu, the chartered accountant and former CFO of a large export group. Mithu has kept the books of many working capital plans, and she has seen many cousins with ideas. "A swap is a tool with a fence around it," she says. "Let's walk along the fence."

This lesson covers Q-5 to Q-8, the last paragraphs of the export circular.

Para Q-5New to the master circular

Swaps shall be executed only against available and …

In plain words

Q-5 sets four safeguards.

(1) Only real, free dollars. Swaps are executed only against available and unencumbered balances held in foreign currency owned by exporters. Dollars already tied to another payment, or pledged, can't be swapped.

(2) The bank's own controls. ADs shall keep adequate risk management, credit and liquidity control systems, with internal approval and audit mechanisms.

(3) The exporter's written declaration. Exporters shall give written declarations confirming that they understand the contractual nature of the swap and its rate implications. In plain words: "I know this is a binding contract, and I understand what the agreed rates mean for me, including the cost, even if market rates move."

(4) Not a loan. The swap transaction shall not be treated as a loan or financing facility extended to customers by ADs.

Mithu's picture: "You sell your own dollars today and buy them back on an agreed date." Q-5 says the swap shall not be treated as a loan or financing facility from the bank; the circular doesn't say more about what follows from this.

At the desk

A month later, after new export proceeds have reached her ERQ account, Evelyn asks for another swap of USD 20,000, but USD 8,000 of her ERQ balance is now earmarked for an advance payment the bank is processing (pretend figures). Eliana explains that under Q-5 only available and unencumbered dollars can be swapped, so the swap can cover at most the free USD 12,000. Before booking it, Eliana gives Evelyn the declaration form: she signs that she understands the swap is a contract and what the agreed rates mean.

Key words
Unencumbered fund
Money in an account that is not already tied to, or set aside for, a payment.
Written declaration
A signed statement. Under Q-5, the exporter confirms in writing that it understands the contractual nature of the swap and its rate implications.
Internal audit
A bank's own team that checks whether its staff follow the rules and controls.
Read the rule as written (Para Q-5)

Swaps shall be executed only against available and unencumbered balances held in foreign currency owned by exporters. ADs shall maintain adequate risk management, credit, and liquidity control systems, along with internal approval and audit mechanisms. Exporters shall provide written declarations confirming their understanding of the contractual nature of the swap and associated rate implications. This swap transaction shall not be treated as loan/financing facility extended to customers by ADs.

Source: Bangladesh Bank, FEPD-1 Circular No. 26, 30 July 2026, Part Q, paragraph 5 (page 58). The original circular is the authority.

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Para Q-6New to the master circular

Taka funds obtained by exporters under the swap …

In plain words

Q-6 fences the Taka. The Taka an exporter gets from a swap must be used solely for bona fide working capital purposes related to export operations. Our own examples (not the circular's) would be wages, utility bills or local inputs for export orders.

And firmly: no speculative positions shall be taken under the arrangement. Buying land, shares or gold to sell later at a profit is not export working capital, and betting on rates is speculation.

The circular doesn't list which expenses count as working capital; the test is that they are genuine and related to export operations.

At the desk

Evelyn's land idea fails the Q-6 test. Mithu shakes her head kindly: "The swap Taka is for bona fide working capital related to your export operations, such as Thursday's wages. Land near the highway is not working capital for your export operations, and buying it only to sell at a profit is the kind of speculation Q-6 bars. Q-6 says no on both counts." Evelyn sighs, then smiles. "The cousin will survive."

Key words
Working capital
The money a business needs for its day-to-day running, such as wages, utility bills and raw materials.
Speculative position
A deal made to profit from a future change in prices or rates, not to meet a real business need.
Bona fide
Genuine; made in good faith.
Read the rule as written (Para Q-6)

Taka funds obtained by exporters under the swap arrangement shall be used solely for bonafide working capital purposes related to export operations; no speculative positions shall be undertaken under this arrangement.

Source: Bangladesh Bank, FEPD-1 Circular No. 26, 30 July 2026, Part Q, paragraph 6 (page 58). The original circular is the authority.

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Para Q-7New to the master circular

All transactions need to be properly documented …

In plain words

Q-7 is about the paper trail. All swap transactions must be:

  • properly documented;
  • recorded in line with international best practices; and
  • reported to Bangladesh Bank as per routine procedures.

The circular doesn't name a new report or form for swaps; it points to routine procedures.

At the desk

After booking Evelyn's swap, Eliana files the swap confirmation, the deal ticket with both legs, and Evelyn's signed declaration together. The trade operations team records the deal as international best practices expect and reports it to Bangladesh Bank through the routine reporting. "If an auditor opens this file next year," Mithu says, "it should tell the whole story without anyone in the room."

Key words
Deal ticket
A bank's record of a foreign exchange deal: who, what currency, how much, which rates and which dates.
Reporting requirements
The returns and information a bank must regularly send to Bangladesh Bank.
Read the rule as written (Para Q-7)

All transactions need to be properly documented, recorded in terms with international best practices, and reported to Bangladesh Bank as per routine procedures.

Source: Bangladesh Bank, FEPD-1 Circular No. 26, 30 July 2026, Part Q, paragraph 7 (page 58). The original circular is the authority.

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Para Q-8New to the master circular

In compliance with the above instructions, ADs may also …

In plain words

Q-8 brings in the zones. Following the instructions above, ADs may also enter into FC-Taka swaps with exporters operating in the specialized zones:

  • Export Processing Zones (EPZ);
  • Private Export Processing Zones (PEPZ);
  • Economic Zones (EZ); and
  • High-Tech Parks (HTP).

These swaps are against unencumbered balances in their foreign currency accounts kept under Part-P of this circular (Lesson 40).

"In compliance with the above instructions" means the same fence applies inside the zones: owned and unencumbered dollars, the bank's controls, the written declaration, not a loan, Taka only for export working capital, and proper records and reports. One gap: Q-3 sets tenor limits only for ERQ balances and 30-day pools, and Q-8 doesn't say which tenor limit applies to swaps against Part-P balances.

At the desk

Mehnaz's Type A factory keeps its export dollars in a foreign currency account under Part-P. She needs Taka for an electricity bill but wants to keep her dollars for a yarn import next month. Eliana confirms that Q-8 lets the AD enter into a swap with her factory against the unencumbered balance in that account, in compliance with the instructions above in Part Q, including the written declaration and use of the Taka only for export working capital.

Key words
Foreign currency account
A bank account held in a foreign currency, such as US dollars, rather than Taka.
Read the rule as written (Para Q-8)

In compliance with the above instructions, ADs may also enter into FC-Taka swap arrangements with exporters operating in Specialized Zones-including Export Processing Zones (EPZ), Private Export Processing Zones (PEPZ), Economic Zones (EZ), and High-Tech Parks (HTP)-against unencumbered balances held in their respective foreign currency accounts maintained as per Part-P of this circular.

Source: Bangladesh Bank, FEPD-1 Circular No. 26, 30 July 2026, Part Q, paragraph 8 (page 58). The original circular is the authority.

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Putting it together

So far: swaps are executed only against available and unencumbered foreign currency balances that exporters own; ADs keep adequate risk management, credit and liquidity controls with internal approval and audit; exporters sign written declarations that they understand the contract and its rate implications; and a swap is not treated as a loan or financing facility. The Taka from a swap may be used only for bona fide working capital for export operations, never for speculative positions. Every swap is properly documented, recorded in line with international best practices and reported to Bangladesh Bank as per routine procedures. ADs may also do these swaps with exporters in EPZs, PEPZs, EZs and HTPs, against unencumbered balances in their Part-P foreign currency accounts.

Next: this was the last Part of the export circular. The export room is now complete, from Part A to Part Q. Well done for reaching the end!

Check yourself

30 questions, in 3 sets of up to 10. Nobody sees your answers but you.

Set 1 of 3

1. Under Q-5, against which balances may swaps be executed?
2. What must ADs maintain under Q-5?
3. What must exporters provide under Q-5?
4. How does Q-5 say a swap transaction is treated?
5. True or false: under Q-5, a verbal 'yes' from the exporter is enough; no written declaration is needed.
6. Desk case: For a second swap, Evelyn has USD 20,000 in her ERQ account, but USD 8,000 is earmarked for an advance payment (pretend figures). What is the most she can swap?
7. Desk case: A new dealer wants to book swaps without any internal approval step 'to save time'. What does Q-5 require?
8. True or false: under Q-5, an exporter's foreign currency pledged as security for another facility can be used for a swap.
9. Desk case: Evelyn asks whether her swap will show as a loan from the bank. What does Q-5 say?
10. Under Q-6, what may Taka obtained under a swap be used for?

Set 2 of 3

11. What does Q-6 forbid under the swap arrangement?
12. Desk case: Evelyn wants to use swap Taka to buy land near the highway and sell it later at a profit. What does Q-6 say?
13. Desk case: Evelyn uses swap Taka to pay this month's factory wages for an export order. Does this fit Q-6?
14. True or false: Q-6 gives a complete list of the expenses that count as working capital.
15. Desk case: An exporter wants to use swap Taka to buy dollars elsewhere, hoping the rate rises before maturity. What is this under Q-6?
16. Under Q-7, how must swap transactions be handled?
17. To whom are swap transactions reported under Q-7?
18. True or false: Q-7 creates a new named form for reporting swaps.
19. Desk case: A dealer books a swap by phone and keeps no confirmation or record. What does Q-7 require?
20. Under Q-8, with whom may ADs also enter into FC-Taka swaps?

Set 3 of 3

21. Against which balances may zone exporters do swaps under Q-8?
22. What do the words 'In compliance with the above instructions' in Q-8 mean for zone swaps?
23. Which of these zones does Q-8 name?
24. Desk case: Mehnaz's Type A factory wants a swap against the unencumbered dollars in its Part-P foreign currency account. What does Q-8 say?
25. True or false: a zone exporter doing a swap under Q-8 must also give the written declaration required in Q-5.
26. Desk case: Mehnaz wants to use swap Taka to buy shares on the stock market, hoping for a quick gain. What applies?
27. Which paragraph says the swap is not a loan or financing facility?
28. Under Q-5, what must the exporter's written declaration confirm?
29. Under Q-7, swap transactions are recorded in line with what?
30. Desk case: An exporter asks whether swap Taka may pay for inputs for a domestic-only product line with no export link. What does Q-6 point to?
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