Foreign currency accounts for business: Benefits and how they work

Doing business globally can have many complicated requirements, but opening an account at a foreign bank may not necessarily be one of them.

If you don’t need in-country banking services overseas — such as a branch for accepting deposits or the ability to initiate tax payments electronically — often a better strategy is to open a business foreign currency account with your U.S.-based bank.

The case for a U.S.-based foreign currency bank account

For a company doing business globally, a foreign currency-denominated account can minimize currency conversions. Such an account can allow you to better manage foreign exchange risk — and achieve other strategic benefits — by making and receiving payments in the currencies of your suppliers and customers.

But you can get those benefits without opening an in-country foreign bank account. A foreign currency account domiciled in the U.S. can, in many cases, offer those benefits and several others:

Enjoy a simpler, more streamlined banking experience.

If you open a foreign currency account at your U.S. bank, you don’t need to manage a new foreign bank relationship. You can access information on all your accounts — and send and receive international wire transfers — through the same bank portal you use to manage your domestic U.S. dollar accounts. And you can maintain one point of contact for all international treasury service needs. As a result, a foreign currency account in the U.S. adds efficiency to your daily treasury operation.

Open a new account in days rather than months.

Due to complex foreign banking regulations, establishing a new relationship with a foreign bank and opening an in-country account can take months — sometimes six or more. In contrast, opening a foreign currency account in the U.S. typically takes a week or less.

Protect your funds.

Balances in foreign currency accounts in the U.S. are eligible for Federal Deposit Insurance Corp. Protection.

Minimize regulatory paperwork and filings.

A company with a foreign currency account domiciled in the U.S. doesn’t have to file a Report of Foreign Bank and Financial Accounts (FBAR), which it might have to do if it had an in-country account with a foreign bank.

Better pricing, more competitive

Foreign currency accounts can make good sense for companies of about any size, says Claudia Flores, vice president and senior product manager at U.S. Bank. In addition to mitigating foreign exchange risk, the ability to pay suppliers and collect from customers in their local currency can provide a competitive advantage, she says.

“Some suppliers will offer favorable pricing or terms if they don’t have to receive U.S. dollars and convert those dollars into their local currency,” Flores explains. “Similarly, the ability to invoice foreign customers in their local currency — eliminating their foreign exchange conversion needs and related risk — can make your company more competitive in local markets.”

Is a foreign currency account right for your business?

One U.S.-based business that operates globally and maintains several foreign currency accounts domiciled in the U.S. is an international airline.

“The airline conducts business with vendors in all of its destination countries, including food caterers and suppliers that help maintain and fuel its planes,” Flores says. “It’s able to pay them from its foreign currency accounts in the U.S. without maintaining an in-country foreign bank account in those locations.”

Another user of foreign currency accounts is a software company with extensive sales in Europe. At one point, Flores says, the company had a major on-the-ground European presence, local foreign bank accounts and plans for global expansion. Then COVID hit and the company had to abandon its presence in Europe. When it was no longer able to meet the physical presence requirements for maintaining local accounts, the company was “kindly asked to exit the relationship” with its European bank.

Because the software company still had many customers in Europe, it responded by establishing foreign currency accounts with its U.S.-based treasury management bank in both euros and British pounds. “The foreign currency accounts have allowed the company to continue to mitigate foreign exchange risk without having to meet the additional requirements for banking in Europe,” Flores reports.

Many U.S. banks offer foreign currency accounts that allow companies to hold, pay and receive funds in one of a variety of currencies. These accounts can help your business stay globally competitive by fulfilling your international payments and receivables needs in one convenient place.

“If your company just needs to send payments and receive deposits electronically, and doesn’t need in-country banking services, a foreign currency account can be a nice solution,” Flores says.

Doing business today requires a global perspective and a partner with the expertise to help you manage international payments and control exchange rates. To determine if opening a business foreign currency account in the U.S. could support your international payment needs, contact your U.S. Bank representative.