Official Exchange Rate vs. Bank Exchange Rate: Why Are They Different?

What Is the Official Exchange Rate?

The official exchange rate is the value of a foreign currency established by the financial regulator in relation to the local currency.

It can be used for various calculations, accounting operations, statistical purposes and other purposes defined by applicable rules and legislation.

It is important to understand that the official exchange rate is not necessarily the price at which a bank will buy your US dollars or sell you euros in cash.

Therefore, it is not entirely correct to compare the official exchange rate directly with a bank's buying or selling rate.

What Is a Bank Exchange Rate?

A commercial bank sets its own buying and selling rates for foreign currencies.

Usually, at least two rates are published:

• Buying rate — the price at which the bank buys foreign currency from you.

• Selling rate — the price at which the bank sells foreign currency to you.

These rates are different.

For example, a bank might buy US dollars at 16.30 Transnistrian rubles and sell them at 16.40 Transnistrian rubles.

If you have US dollars and want Transnistrian rubles, the buying rate applies.

If you have Transnistrian rubles and want to buy US dollars, the selling rate applies.

Why Doesn't a Bank Use the Official Exchange Rate?

A commercial bank conducts currency transactions under its own commercial conditions and has its own costs and risks.

Therefore, the prices at which it buys and sells foreign currency are formed separately from the official exchange rate.

Banks may also take into account market conditions, demand for a particular currency, available foreign-currency funds and other factors.

For this reason, you should not expect a bank to buy and sell currency at exactly the official exchange rate.

Example: Official Rate vs. Bank Rates

Consider this simplified example:

All three figures refer to the US dollar, but they have different purposes.

If you want to sell USD 1,000 to a bank, the bank's buying rate applies:

1,000 × 16.30 = 16,300 Transnistrian rubles

If you want to buy USD 1,000, you need to use the bank's selling rate:

1,000 × 16.40 = 16,400 Transnistrian rubles

You cannot simply substitute the official exchange rate and expect the bank to use it for a cash transaction.

Which Rate Should You Look at When Buying Currency?

If you have Transnistrian rubles and want to buy US dollars, euros or another foreign currency, you need to look at the bank's selling rate for that currency.

For example, if a bank sells US dollars at 16.40 Transnistrian rubles, buying USD 1,000 would cost 16,400 Transnistrian rubles, excluding any additional fees.

When comparing several banks, a lower selling rate is generally better if all other conditions are the same.

Which Rate Should You Look at When Selling Currency?

If you already have US dollars and want to receive Transnistrian rubles, you need to look at the bank's buying rate for US dollars.

All else being equal, a higher buying rate is more favorable because you will receive more local currency for the same amount of foreign currency.

The same principle applies to euros, Russian rubles, Moldovan lei and other currencies.

Why Is There a Difference Between Buying and Selling Rates?

The difference between a bank's buying and selling rates is called the exchange-rate spread.

A bank buys foreign currency at one price and sells it at another.

For example, if a bank sells a dollar for 16.40 Transnistrian rubles but buys it back for 16.30, the difference is 0.10 rubles per dollar.

For USD 1,000, that difference amounts to 100 Transnistrian rubles.

This is why the spread should be considered when exchanging currency, especially if you plan to exchange the currency again shortly afterwards.

Why Do Different Banks Have Different Exchange Rates?

Even when several banks operate in the same region and deal with the same currencies, their commercial exchange rates do not have to be identical.

Each commercial bank sets its own rates based on its operating conditions and other factors.

Therefore, before making a large exchange, it makes sense to compare several banks.

On Kurspmr.com, you can compare the buying and selling rates offered by different banks and determine which option is more attractive for the transaction you want to make.

Why Can the Exchange Rate Change During the Day?

An exchange rate is not necessarily fixed throughout the day.

A bank may change its rates depending on market conditions and its own operating circumstances.

Therefore, a rate you see in the morning may not necessarily be available later in the day.

This is particularly important for large transactions. Before exchanging money, check the current rate and the applicable terms with the bank.

Can You Rely Only on the Official Exchange Rate?

The official exchange rate is useful as a general reference and for tracking the value of a currency.

However, if you actually want to exchange cash, you need to look at the commercial exchange rates offered by banks.

The basic rule is:

• Buying foreign currency from a bank → look at the selling rate.

• Selling foreign currency to a bank → look at the buying rate.

In other words, the official exchange rate is primarily a reference value, while the commercial bank rate tells you the price at which a particular bank is prepared to conduct the transaction.

How to Compare the Official Rate and Bank Rates

To avoid confusion, follow these steps:

1. Determine which currency you want to buy or sell.

2. Determine the direction of the transaction.

3. Check the official exchange rate as a general reference.

4. Compare the commercial rates offered by several banks.

5. When buying currency, compare selling rates.

6. When selling currency, compare buying rates.

7. Check whether any commission or additional conditions apply.

8. Calculate the final amount you will receive or pay.

Why Check the Exchange-Rate History?

If you do not need to exchange money immediately, it can be useful to look not only at the current rate but also at previous rates.

Historical exchange-rate data can help you understand how much a currency has changed over a particular period.

However, past performance does not guarantee future movements.

Historical data is useful for analysis, but it cannot reliably predict what the exchange rate will be tomorrow or next week.

Official Rate, Bank Rate and Actual Exchange Rate Are Not the Same Thing

Several different values for the same currency do not necessarily mean that one source is publishing incorrect information.

The official exchange rate and commercial bank rates have different purposes.

The rate used for an actual transaction also depends on whether you are buying or selling the currency.

Therefore, when planning an exchange, do not simply search for the “USD exchange rate.”

First determine which rate applies to your particular transaction.

Summary

The official exchange rate should not automatically be treated as the price at which a bank will exchange cash with a customer.

For an actual currency exchange, you should look at the commercial rate offered by the particular bank.

If you are buying foreign currency, look at the selling rate.

If you are selling foreign currency, look at the buying rate.

For a large transaction, compare several banks and take any applicable commissions into account.

Checking the current bank rates before exchanging money takes only a few minutes and can help you avoid mistakes and choose better exchange conditions.