Topping-Up Clause

AAA

DEFINITION of 'Topping-Up Clause'

A condition implemented in a back-to-back or two-currency loan. A topping-up clause is designed to protect lenders from foreign-currency devaluations. It requires borrowers to make additional currency payments to lenders to cover any devaluation in a currency's value.

INVESTOPEDIA EXPLAINS 'Topping-Up Clause'

Topping-up clauses have some limitations on the kind of risk protection and rewards that they can provide for lenders. Some lenders have no use for the additional currency payments and may also be required to declare the additional payments as income, resulting in increased taxes. Banks now usually assume the risk in these transactions for a fee.

RELATED TERMS
  1. Devaluation

    A deliberate downward adjustment to the value of a country's ...
  2. Foreign Currency Swap

    An agreement to make a currency exchange between two foreign ...
  3. Loan

    The act of giving money, property or other material goods to ...
  4. Fixed-For-Floating Swap

    An advantageous arrangement between two parties (counterparties), ...
  5. Foreign-Exchange Risk

    1. The risk of an investment's value changing due to changes ...
  6. Remote Deposit Capture

    A technology-based method that lets banks accept checks for deposit ...
RELATED FAQS
  1. Where did the term 'pip' in currency exchange come from?

    The term pip is an acronym for percentage in point or price interest point. It measures a unit of change within a pair of ... Read Full Answer >>
  2. How does your checking account affect your credit score?

    Your credit report provides a snapshot for prospective lenders, landlords and employers of how you handle credit. For any ... Read Full Answer >>
  3. What is the difference between pips, points, and ticks?

    Point, tick and pip are terms used to describe price changes in the stock market and other markets. While traders and analysts ... Read Full Answer >>
  4. What is the banking sector?

    The banking sector is the section of the economy devoted to the holding of financial assets for others, investing those financial ... Read Full Answer >>
  5. What are the nations with the lowest PPP (purchasing power parity) with respect to ...

    Purchasing power parity (PPP) is one of several economic indicators used to compare how much goods cost from country to country. ... Read Full Answer >>
  6. What's the difference between a letter of credit and a bank guarantee?

    Bank guarantees represent a more significant contractual obligation for banks than letters of credit do. A letter of credit ... Read Full Answer >>
Related Articles
  1. Forex Fundamentals

    What Causes A Currency Crisis?

    Find out what can cause a currency to collapse, and what central banks can do to help.
  2. Forex Education

    Currency Exchange: Floating Rate Vs. Fixed Rate

    Baffled by exchange rates? Wonder why some currencies fluctuate while others are pegged? This article has the answers.
  3. Forex Education

    The New World Of Emerging Market Currencies

    Take advantage of foreign currency markets without stepping out of your house.
  4. Stock Analysis

    What Makes Goldman Sachs a Good Bet?

    Six years after the subprime meltdown, Goldman Sachs is a robust $87 billion company instead of a historical footnote. Here's why.
  5. Economics

    What is a Nostro Account?

    A nostro account is a bank account held in a foreign country by a domestic bank, denominated in the currency of that country.
  6. Personal Finance

    4 Tips To Cut Your Monthly Bank Fees

    We asked banking professions to share their biggest tips for tackling bank fees, and hopefully save more even before spring hits.
  7. Entrepreneurship

    JPMorgan vs. Goldman Sachs: A Tale of Two Stocks

    The performance of JPMorgan and Goldman has been impressive, but one has a slight edge.
  8. Stock Analysis

    How Citigroup Ensured That It's Too Big to Fail

    As a business, Citi has everything going for it. Scale, operational breadth...and the ear of key policymakers.
  9. Economics

    Mitigation Trade: Making Up For Environmental Harm

    Mitigation banking is a system by means of which the liability of ecological damage is transferred from the permittee to the mitigation banker through a system of credits and debits under regulatory ...
  10. Forex

    Understanding Currency Carry Trade

    A currency carry trade is a long-term investment strategy used primarily by large institutional investors. The purpose is to make a profit over time from differences in interest rates between ...

You May Also Like

Hot Definitions
  1. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  2. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  3. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  4. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
  5. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
Trading Center