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Avoiding Excessive Spanish Bank Charges- Part 2- Foreign Exchange

Spanish Legal IssuesPosted by Andrew Thu, February 02, 2017 15:32:46

January 30th, 2015

Having previously covered the concerns many owners of Spanish properties express regarding the level of Spanish bank charges, it has been recommended that the issue of Foreign Exchange (FX) should also be specifically mentioned.

The current weakness of the Euro currency is fueling interest in the Spanish property market, where- even with the currency issue on one side- prices in many areas remain attractively low.

However, the converse of this happy consequence of Euro weakness for inward investors, is that sellers of Spanish properties wishing to repatriate funds to their countries outside the Eurozone, are facing unattractive exchange rates- which can impact strongly on final returns from Spanish property sales.

But an important (and potentially very costly) issue which faces all individuals coming into or going out of the Euro currency is often overlooked. This is the process and cost of FX- particularly in the context of larger transactions, e.g. buying and selling properties. It comes as a shock to many, to find that the total cost of a High Street bank to High Street bank transfer where currency changes between Euros and Sterling (for example) can be as high as 5%. That is a 5% ‘loss’ to the individual making the transfer!

And a significant proportion of this cost represents the banks’ profit in the FX trade. Indeed, several major banks make a point of emphasising their free or low cost electronic transfers in and out of the Eurozone- superficially making this option appear to be economical. However, as the real profit for the bank is in the FX trade itself, the relatively tiny cost to the bank of the actual electronic transfer is of no real consequence in larger transactions.

It is therefore advisable before committing to an FX transaction, to be absolutely clear (based on comparing the actual amount debited from your account in one country; to the final net amount which will be credited to your account in another and considering official FX rates) as to the cost to you of the FX transaction. This also enables a like for like comparison between the cost of your High Street bank to High Street bank transfer; and the deal offered by an independent FX specialist.

Of course, before engaging an independent FX specialist to save money on the FX trade, it is essential to be assured of the legal and regulatory standing of the FX specialist in question, to avoid the obvious risks and pitfalls.

But professionals engaged in transactions in Spain for foreign nationals where there are frequently FX requirements, will generally be able to recommend a pre-vetted independent FX specialist, to assist in minimising the otherwise hidden costs in the FX process.

Please speak to us at Legal 4 Spain when considering a sale or purchase of a Spanish property- or if you have any FX requirement- as this is an area we will be able to assist, to protect your interests fully; but always at a competitive rate.