Gold Standard:

The gold standard is a monetary system where a country's currency or paper money has a value
directly linked to gold. With the gold standard, countries agreed to convert paper money into a
fixed amount of gold. A country that uses the gold standard sets a fixed price for gold and buys
and sells gold at that price. That fixed price is used to determine the value of the currency. For
example, if the U.S. sets the price of gold at $500 an ounce, the value of the dollar would be
1/500th of an ounce of gold.
Gold Exchange standard:
Gold-exchange standard, monetary system under which a nations currency may be converted
into bills of exchange drawn on a country whose currency is convertible into gold at a stable rate
of exchange. A nation on the gold-exchange standard is thus able to keep its currency at parity
with gold without having to maintain as large a gold reserve as is required under the gold
standard.
The gold-exchange standard came into prominence after World War I because of an inadequate
supply of gold for reserve purposes. British sterling and the U.S. dollar have been the most
widely recognized reserve currencies. The requirement of a fixed rate of exchange for the reserve
currency has the effect of limiting the freedom of the reserve-currency countrys monetary policy
to solve domestic economic problems. The use of gold reserves is now limited almost
exclusively to the settlement of international transactions, on rare occasions.
Gold Bullion Standard:
A gold standard under which the coinage and circulation of gold is usually prohibited but the
shipment of gold in international transactions is permitted and a gold bullion reserve is
maintained as a support for the currency. A gold standard without redemption of currency in gold
coin. The gold bullion standard has the advantage of economizing in the use of gold by keeping
it from domestic circulation without preventing its free international movement.
CONVERTIBILITY OF TAKA
Bangladesh Bank declared Taka convertible on 24th March 1994 for current Account transactions
interms of Article viii of the IMF article of agreement. The declaration symbolized a turning
point in the countrys exchange management and exchange rate systems.
Simultaneously Bangladesh Bank worked towards systematically liberalizing the exchange
restrictions. These measures coincided with the overall macro-economic reforms undertaken by
the Government concerning trade liberalization, export orientation and deregulations. These
measures were aimed at creating an environment conducive to growth in Investment and
productivity and pave the way for entry into global village (Globalization).

Convertible means the ability of the residents to convert Local Currency into foreign currencies
at the ruling exchange rates for paying their external obligations. In other words, Convertibility
means free floating of the Taka with least intervention from the Govt. and the central bank in the
fixation of exchange rate and making foreign exchange freely available for all transactions.
Convertibility of the Taka implies a process of strengthening the Taka to the status of an
International Liquidity to create more confidence in the domestic and par value of Taka for its
easy acceptability both in national and international economic transactions. The ideas of freeing
the Taka had been prompted by the continuous stability in Macro-economic management,
especially the maintenance of monetary stability and reduction of budgetary deficits through
effective fiscal measures.
A currency is said to be convertible when it may be fully exchanged for another currency.
Convertibility of currency is not meant for domestic transactions propose. It is also required for
international transactions.
In Bangladesh, our currency is convertible in current Account transactions. We know that
economic transactions of a country with the rest of the world are recorded in Balance of payment
(BOP). A countrys BOP is a summary statement of all its economic transactions with other
countries of the world during a particular period of time. The main components of BOP are: -A) CURRENT ACCOUNT
B) CAPITAL ACCOUNT
C) OFFICIAL RESERVE ACCOUNT
Reconciliation of Nostro vostro and loro accounts:
An accounting process used to compare two sets of records to ensure the figures are in agreement
and are accurate. Reconciliation is the key process used to determine whether
the money leaving an account matches the amount spent, ensuring that the two values are
balanced at the end of the recording period. At the end of every month it is a good
idea to reconcile your checkbook by comparing your receipts with your bank statement. Among
other advantages, this type of account reconciliation makes it possible to determine
whether money is being fraudulently withdrawn from an account. The account a correspondent
bank, usually U.S. or UK, holds on behalf of a foreign bank. Also known as a loro account. An
account that a bank holds with a foreign bank. Nostro accounts are usually in the currency of the
foreign country. This allows for easy cash management because currency doesn't need to be
converted.
Loro Account: (Italian, from Latin, Loro; English, 'theirs').
An account held by a domestic bank in itself on behalf of a foreign bank.The latter in turn would
view this account as a Nostro account. A Loro is our account of their money, held by you. Loro
account is a record of an account held by a second bank on behalf of a third party; i.e, my record

of their account with you. In practice this is rarely used, the main exception being complex
syndicated financing. If any other bank for the purpose of a transaction refer to an account
maintained by yet another bank in some other countries it is known as loro account.
An expression used, for example, by one bank when telling another bank to transfer money to the
account of a third bank. In correspondent banking, an account held by one bank on behalf of
another bank (the customer bank); the customer bank regards this account as its Nostro
account. The Loro account is an account wherein a bank remits funds in foreign currency to
another bank for credit to an account of a third bank.