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Structured Binary Deposit

A deposit product for higher income from available funds.

A Structured Binary Deposit is intended for:

  • natural persons
  • corporate entities
  • Czech nationals and foreigners
  • clients who demand above-standard appreciation of their funds

Characteristics of a Structured Binary Deposit:

  • A Structured Binary Deposit is a deposit product that allows clients a higher level of appreciation of available funds on correct estimation of market development.
  • It is possible to make the deposit in the form of a term deposit or deposit bill of exchange.
  • The client accepts a certain degree of risk of a lower interest income if he or she incorrectly estimates market development.
  • The resulting interest income is bound to the development of the reference exchange rate and its daily ascertained values.
  • The parameters agreed between the dealer and the client include:
    • the reference period and
    • the upper and lower limit of the reference exchange rate band.
  • The resulting interest income is calculated according to the following formula:
    • deposit amount x min. interest rate in % p.a., if the reference exchange rate reached the lower limit during the reference period.
    • deposit amount x max. interest rate in % p.a., if the reference exchange rate reached the upper limit during the reference period.
    • deposit amount x mid. Interest rate in %, if neither of the facts stated above occur during the course of the reference period
  • Subject to client wishes, this deposit may be structured by the dealer in such a way that the maximum interest rate is paid out when the lower limit is crossed and, conversely, the minimum interest rate would apply when the upper limit is crossed.
  • If the reference exchange rate reaches both the upper and the lower limit over the course of the reference period, the resulting interest income is determined according to which limit was reached first.
  • The date of the start of the reference period is usually the value date of the transaction + max. 2 working days, the date of the end of the reference period is exactly the maturity date of the transaction - 2 working days.

Risks

  • The client must be aware of the risk of a lower interest income if he or she incorrectly estimates market development.
  • In the worst case scenario, the client's income is lower by the difference between the standard market interest income and the minimum interest income for a structured deposit.
  • This concerns a type of structured deposit with a guaranteed principal. This guarantee only applies for deposits duly ended on their maturity date.
  • Deposits made in the form of deposit bills of exchange cannot be terminated early.

To better illustrate, we provide a specific example of a Structured Binary Deposit.

Example
  • The client deposits CZK 250 mil. for a period of 3 months.
  • The current interest rate is 2.00% p.a.
  • However, the client requires a higher interest income, he or she is offered a Structured Binary Deposit, which pays out:
    • 3.30% p.a., if the EUR/CZK reference exchange rate reached the upper limit during the reference period
    • 0.50% p.a., if the EUR/CZK reference exchange rate reached the lower limit during the reference period
    • 2.50% p.a., if none of the facts stated under letters a) and b) above occurs over the course of the reference period

Note: If the reference exchange rate reaches both the upper and the lower limit during the reference period, the resulting interest income is determined according to which limit was reached first.

Advantages of a Structured Binary Deposit kept at Komerční banka:

  • the transaction is always concluded by telephone with the Client transaction dealer
  • you receive confirmation of the concluded transactions containing the agreed parameters of the transaction
  • you are informed of the resulting interest income on the date of the end of the reference period by being sent “Confirmation of the level of income”, which also includes information about tax deducted.
  • the deposit bill of exchange remains in the safekeeping with Komerční banka; there is thus no need to present the bill of exchange in person on the maturity date; settlement is implemented automatically

A Structured Binary Deposit allows for:

  • above-standard appreciation of your available funds

How to get Structured Binary Deposit?

  • contact your relationship manager
  • call the toll-free KB info line on 800 521 521

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