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Parallel loan

• A process whereby two companies in different countries borrow each other's currency for a specific period of time, and repay the other's currency at an agreed maturity for the purpose of reducing foreign exchange risk. Also referred to as back-to-back loans.

• An example of a parallel loan would be IBM agreeing to lend dollars to a sub of British Petroleum in exchange for the latter lending pounds to an IBM British sub. Such agreements are struck only when exchange controls in one or more countries prevent normal capital flows.

 
 

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 Embedded terms in definition
 Borrow
Capital
Currency
Exchange controls
Exchange risk
Exchange
Foreign exchange risk
Foreign exchange
Foreign
Lending
Lend
Maturity
Risk
Time
 
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