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Banking5 min read · Updated: 10 November 2026

The bank sells currency at one rate and buys it at another: what does an exchange really cost?

A firm bought 10 000 dollars, a week later the contract was cancelled and it sold the dollars back to the bank. The rate did not change, yet 1.5 million soums disappeared. How the gap between the selling and buying rates works, why the lowest rate is not always the cheapest, and what is fixed in the accounts and what is left to the accounting policy.

"Qarshi Qadoq" LLC was due to pay a foreign partner 10 000 dollars for spare parts. Its accountant Zarina bought dollars through the bank. A week later the partner cancelled the contract and Zarina sold the dollars back to the bank. During that week the rate did not move by a single soum. Yet the account was 1.5 million soums short. Where did the money go?

All rates and amounts are hypothetical, compiled by the author.

Three rates: which one is for what?

RateHypothetical value, soumsFor whom and for what
Central Bank rate12 000The official rate. In the accounts a currency transaction is recognised at this rate
Bank's selling rate12 100The price at which the bank sells you currency
Bank's buying rate11 950The price at which the bank buys currency from you

A bank usually sells currency dearer and buys it cheaper. The difference between the two rates (the spread) is the bank's income from the exchange and its fee for the risk of the rate changing. In the example it is 12 100 − 11 950 = 150 soums, about 1.25% of the mid rate (12 025).

Exchanging twice: money that went round in a circle

StepCalculationSoums
Dollars bought10 000 × 12 100121 000 000
Dollars sold back10 000 × 11 950119 500 000
Loss121 000 000 − 119 500 0001 500 000

Nothing was bought and the rate did not change, but the firm lost 1 500 000 soums. That is about 1.24 percent of the amount spent, i.e. a 150-soum spread on every dollar: 10 000 × 150 = 1 500 000 soums. It can be split into two parts: - paid above the Central Bank rate when buying: 10 000 × (12 100 − 12 000) = 1 000 000 soums; - received below the Central Bank rate when selling back: 10 000 × (12 000 − 11 950) = 500 000 soums.

Conclusion: even if the rate does not change, buying currency "just in case" and then selling it back costs the amount of the spread every time.

Is the lowest rate always the cheapest?

Before buying dollars a second time, Zarina compared two banks:

Bank "A"Bank "B"
Selling rate12 10012 060
For 10 000 dollars121 000 000120 600 000
Commissionnone0.4%: 482 400
Total payment121 000 000121 082 400
Actual price of one dollar12 100.0012 108.24

Bank "B"'s rate is 40 soums lower, but with the commission it is 82 400 soums more expensive. The rule: compare not the rate but the total soums paid for one transaction. Divide the total by the number of dollars and you get the real rate.

How can exchange costs be reduced?

  1. Avoid unnecessary exchanges. Find out from the payment calendar when and how many dollars will be needed: currency bought "just in case" and not used is lost on the spread when sold back.
  2. Compare the total price. Bring the rate, percentage commission and fixed-amount fees down to one figure.
  3. If the commission is a fixed amount, combining small transactions reduces the cost per dollar.
  4. Talk to the bank. For large or regular transactions, ask for rate and fee terms in advance and get them confirmed in writing.

What is fixed in the accounts, and what is left to the accounting policy?

  • When soums are transferred to buy currency, NAS No. 21 (paragraph 226, line 5) gives a precise journal entry: Dr 5530 "Other special accounts" – Cr 5110 "Settlement account", 121 000 000 soums.
  • Dollars received on the currency account (5210 "Foreign currency accounts in the country") are translated into soums at the Central Bank rate (NAS No. 22, paragraph 7): 10 000 × 12 000 = 120 000 000 soums. The difference from the 121 000 000 soums paid is 1 000 000 soums.
  • The NAS No. 21 model tables contain no specific line for moving the dollars from 5530 to 5210 or for which account this 1 000 000-soum difference goes to. Set this procedure in your accounting policy and agree it with the auditor.
  • Do not call this difference an exchange difference. Under the NAS No. 22 definition (paragraph 3), an exchange difference arises from a change in the exchange rate. In our example the rate did not change: the difference came from the gap between the bank's selling rate and the Central Bank rate.

Test yourself

5 questions on this topic: pick an option or reveal the answer.

  1. A bank buys US dollars from customers at 12 650 soum and sells them to customers at 12 750 soum (hypothetical rates). A company sold 2 000 dollars of export proceeds to this bank. How many soum does the company receive (without fees)?

  2. A hypothetical commercial bank's assets: government securities 300 bln soum (risk weight 0%), loans to companies 500 bln soum (100%), funds in other banks 200 bln soum (50%). The bank's capital is 90 bln soum. What is the ratio of capital to risk-weighted assets (hypothetical weights)?

  3. A company discounted a bill of exchange with a face value of 20 000 000 soum and 3 months to maturity at a bank. The bank applied an annual discount rate of 24%, with the discount calculated on the face value (discount = face value × rate × months / 12). How much money does the company receive from the bank?

  4. "Asaka avtoqism" LLC assigned a buyer's receivable of 50 000 000 soum to a bank under a factoring agreement. The bank immediately pays 80% of the receivable and withholds a fee of 2% of the receivable (hypothetical terms). How much money does the company receive immediately?

  5. An entrepreneur took a bank loan of 10 000 000 soum: 1 year, 20% simple annual interest, interest and principal paid at the end of the year. When issuing the loan the bank immediately withheld a one-off fee of 2% of the amount (hypothetical terms). What is the approximate effective annual cost of the loan relative to the money actually received?

Answered: 0 / 50 of 5 correct

All tests →

See also

Sources

  1. Fundamentals of banking (general concepts) · a bank's selling and buying rates for currency, the difference between them (spread), commission; general knowledge
  2. NAS No. 22 "Accounting for Assets and Liabilities Denominated in Foreign Currency" (Order No. 201 of the Minister of Economy and Finance of 6 December 2024, registered by the Ministry of Justice on 19 December 2024 under No. 3587), paragraphs 3 and 7 · definition of exchange difference: the difference in soums arising from a change in the exchange rate; a foreign currency transaction is recognised at the Central Bank rate on the date of the transaction
  3. NAS No. 21 "Chart of Accounts for Accounting of Business Entities and Instructions for Its Application", paragraph 226 (line 5) · transfer of funds to purchase foreign currency: Dr 5530, Cr 5110
  4. Example, company name, rates, commission and calculations · compiled by the author, hypothetical; not real bank rates

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