# Sterling account in DC area



## bluesky2015 (Sep 3, 2013)

Hi everyone,

I am kinda new in the US expat forum. I have an urgent question and I will highly appreciate if anyone can help me. 
I want to open a Pound Sterling account, i have contacted my bank which is Bank of America but they said that they do not have it. I live in Washington DC, so can anyone please let me if there is a bank I can open my GBP account. 

Thank you in advance...


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## BBCWatcher (Dec 28, 2012)

EverBank offers pound sterling deposit accounts and CDs.

....But why?


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## bluesky2015 (Sep 3, 2013)

BBCWatcher said:


> EverBank offers pound sterling deposit accounts and CDs.
> 
> ....But why?


Thank you BBCWatcher. To answer your question, I will be applying for UK settlement visa and I have to have a set amount of savings on my bank because my spouse in the UK does not have a job. This amount should set in the bank for 6 months untouched, so as you know the UK currency against Dollars is getting higher each day and by the time its time for me to apply I am afraid that my dollar amount will be lower then the required amount needed. I hope I made sense ??


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## BBCWatcher (Dec 28, 2012)

Not really. 

You're looking to maintain a certain minimum savings (in pound sterling) for purposes of a visa application in the U.K. Yes, the pound-dollar exchange rate varies. If you buy the total amount of pound sterling outright you have a couple potential problems. The first is that the pound could fall just as easily as it could rise, so you could lose a lot of money (in dollar terms), and that would be particularly bad if your visa isn't approved. The second is that it costs money to convert dollars to pounds, and EverBank isn't necessarily the cheapest way to do that.

So, what are the options? Here are a couple variations....

Let's assume you want to protect against the possibility that the dollar falls 15% against the pound. That would be an extraordinary change in value in such a short time. Let's suppose that you need to demonstrate a minimum of 500 pounds of savings for the visa, and you currently have 550 pounds at today's pound-dollar exchange rate. Finally, let's assume the exchange rate today is 1.6, and (for now) that there's zero cost to convert dollars to pounds. So that means you've got $880 today.

A 15% fall in the value of the dollar would imply a "worst case" exchange rate of about 1.88. That would leave you with only 468 pounds ($880 divided by 1.88) -- not enough. But does that mean you should convert 500 pounds worth today? No. You just need to convert enough today to have a total of 500 pounds in the future. That's a bit of algebra which looks like this: 500 = X/1.6 + (880-X)/1.88. "X" in this case is the number of dollars you should convert today. Here we assume you have 880 total today, you need a minimum of 500 pounds in the future, today's exchange rate is 1.6, and the "worst case" fall in the dollar is 15%. And then the answer is...about 343 dollars. In other words, with these particular assumptions you only have to convert less than 40% of your savings in order to fully protect against a 15% fall in the dollar and still meet the minimum pound sterling wealth requirement for your visa. You can adjust the calculation to suit your particular circumstances, but the basic algebra will be the same.

This is important because, in fact, it's not free to convert dollars to pounds. So the fewer you need to convert now, the less expensive it is to hedge against the risk of a fall in the dollar (and the less you'll lose if the dollar actually doesn't move or rises against the pound).

Note that foreign currency transfer specialists such as Xoom, CurrencyFair, XE Trade, and others are probably less expensive for acquiring pound sterling using dollars. Some (but not all) of these firms may require a U.K. destination bank account.

OK, the above example describes how you'd hedge against a downside currency risk (subject to a percentage limit) using only your own resources (savings) and a straight purchase of pounds using dollars. It turns out the world financial markets solved this particular problem a few years ago by offering foreign currency hedging vehicles of various kinds. And these vehicles are now very easy for "ordinary consumers" to use.

Let's take a look at this example which lists quotations for "puts" and "calls" for the Philadelphia Stock Exchange's British Pound Sterling foreign exchange options. Those are the June, 2014, options -- positions would be settled then (in about 6 months in the future). (Other time periods are available.) This article explains how this works pretty well, but I'll try to explain also. You can actually buy these things through your favorite broker in the U.S. (and even outside the U.S.), including most discount brokers. Trading costs are very low.

For example, let's suppose that you're concerned that the dollar will weaken between now and June, 2014, and you cannot bear to accept any dollar weakening beyond 1.7. (The current exchange rate is about 1.63.) OK, then you can buy a call option with a strike price of 1.7 for June, 2014, for example. And that would cost you less than 2% of the value you're hedging. In other words, many, many investors (gamblers?) would be willing to take the other side of that bet. After all, the dollar could strengthen, or it could stay the same -- and the chances of that are a lot better than the chances of the dollar weakening to 1.7 from 1.63 within the next 6 months. If you buy that particular call option one of two things happens:

1. Your option is worthless because the dollar never weakens enough. Investors think this is the most likely outcome, and they're probably not wrong. But that's not _too_ bad because you paid less than 2%, and the dollars you have are still strong. In other words, you didn't buy a lot of pounds that fell in value, and you didn't incur foreign currency conversion costs. (All of these Philadelphia Stock Exchange options are always priced, traded, and kept in U.S. dollars.)

2. Your option is "in the money," meaning you can sell your option to someone else and get dollars -- enough dollars to afford to buy the pounds you need even with the weaker dollar. (More than enough if you bought more call options than you actually need.) You can also hold the option until final settlement/close and get paid that way, assuming you're still in the money.

Someone else can probably explain this all better than I can, but that's the basic idea.

If you decide you want to buy a pound sterling call option you have to research things very carefully to make sure you know what you're doing. You would be buying a right to buy at a particular price on a particular date -- an option to buy. That's different than buying pounds outright. But it's different in a very helpful way for what you're trying to accomplish. You just have to make sure you know what you're doing.

Make sense? If not, maybe someone else can explain it better than I did. For the record, I've never purchased foreign exchange options, so they're new to me, too. But they look pretty interesting and useful in certain circumstances.


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## BBCWatcher (Dec 28, 2012)

One correction: Upon further reading it seems you need to either sell or exercise any "in the money" options on or before their expiration dates. If the option is worthless there's nothing to do, but otherwise you should watch your option(s) and take appropriate action. (Unless foreign exchange options are different/automatic. I'd have to read the fine print more carefully.)


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## bluesky2015 (Sep 3, 2013)

BBCWatcher said:


> One correction: Upon further reading it seems you need to either sell or exercise any "in the money" options on or before their expiration dates. If the option is worthless there's nothing to do, but otherwise you should watch your option(s) and take appropriate action. (Unless foreign exchange options are different/automatic. I'd have to read the fine print more carefully.)


Thank you BBCWatcher..I am really bad in calculations, so it is a bit complicated for me. The amount which I have to have in my saving account should be equivalent of 62,500 GBP untouched for six months..So do u think the GBP is going to raise more than 1.62 till June?? By the way, the UK visa section uses OANA for the currency exchange rate..


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## BBCWatcher (Dec 28, 2012)

Well, how much do you have in U.S. dollar savings? If you have $500,000 in the bank, for example, why are you even worrying?


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## bluesky2015 (Sep 3, 2013)

BBCWatcher said:


> Well, how much do you have in U.S. dollar savings? If you have $500,000 in the bank, for example, why are you even worrying?


I wish I had that much, I would have not worried. Right now I have about $103,425 of savings.. which is arround 63400 GBP..That is the reason I am so worried because I am afraid that by June the $ might fall more and I might end up with less amount the UK immigration requires ...


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## Bevdeforges (Nov 16, 2007)

Just a note here, though - the requirement is to have a certain amount *equivalent to* the stated sum in sterling. There is no need to actually open a sterling account in the US and convert the savings you have to GBP (thereby incurring a loss, however small, on the conversion). 
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

OK, but are your savings growing until U.K. Immigration looks at your account in June, 2014? By how much?

You're about 1.5% above the required minimum value at this instant, as I write this, and according to Oanda.com. Yes, I think you have a reasonable concern if your savings are not growing over the next 6 months.


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## bluesky2015 (Sep 3, 2013)

BBCWatcher said:


> OK, but are your savings growing until U.K. Immigration looks at your account in June, 2014? By how much?
> 
> You're about 1.5% above the required minimum value at this instant, as I write this, and according to Oanda.com. Yes, I think you have a reasonable concern if your savings are not growing over the next 6 months.


 I need the 62500 GBP sat untouched in a bank account that is immediately accessible for six months prior to application and during this period it should not drop even one pound. I can keep adding more from my monthly salary to this savings just to be save. Do think its a good idea?

The account can be in any currency in any country, provided when converted to sterling on the day of application using Oanda spot closing rate, it comes to at least £62,500.

Thank you so much for your kind help.


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## BBCWatcher (Dec 28, 2012)

OK, got it. So you need to show savings that never drop below 62,500 pounds in value over the course of 6 months.

Yes, if you're saving money that's great. I would get much less concerned if you have a 15% surplus at today's exchange rate. In U.S. dollars (as I write this) that would be an account value of $117,107. If you can pull up the account value to that much or more, I think you should be safe and will not be too vulnerable to a possible rise in the value of the pound against the dollar.

I assume U.K. immigration authorities wouldn't accept evidence of your purchasing a foreign currency option, so let's skip that idea for now.

Are they OK with a family member loaning you the money to top up your account, then you paying that family member back over the next couple months (as you generate savings)? I'm assuming a low or zero interest rate to borrow, or that you would simply pay your relative his/her share of the bank interest on the account as you pay back that family member.


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## bluesky2015 (Sep 3, 2013)

BBCWatcher said:


> OK, got it. So you need to show savings that never drop below 62,500 pounds in value over the course of 6 months.
> 
> Yes, if you're saving money that's great. I would get much less concerned if you have a 15% surplus at today's exchange rate. In U.S. dollars (as I write this) that would be an account value of $117,107. If you can pull up the account value to that much or more, I think you should be safe and will not be too vulnerable to a possible rise in the value of the pound against the dollar.
> 
> ...


Thank you again. The UK immigration changed the law in 2012 that you are not allowed to get any loans from anyone, but a gift money is accepted as long as you show the source, the bank statement where it came from and a letter from the giver stating that the money is a gift not a loan. As far as my family is concern they have already contributed so now I just need to keep adding into my already savings of 62,500 pounds until I apply so the raising of pounds in the coming months should not affect the required amount. Am I on the right track ?


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## BBCWatcher (Dec 28, 2012)

Sounds good to me.


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## bluesky2015 (Sep 3, 2013)

BBCWatcher said:


> Sounds good to me.


Thank you again.. I can see today the pound went slightly low.. O God, I wish it remains the same.. I use Currency Converter | Foreign Exchange Rates | OANDA 
I really hope it decreases more


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