Interest Rate Swap - IRS
Interest Rate Risk Protection
If you have a loan with a variable interest rate (Euribor), you can arrange a switch to a fixed interest rate
How does an interest rate swap work?
- The buyer of the interest rate swap (the company) pays a pre-agreed fixed interest rate
- The seller (the bank) pays a variable market interest rate at each calculation period.
Advantages of agreeing to an interest rate swap:
- The product is tailored to match your company's loan
- The loan can also be arranged with another bank
- The swap allows you to pay a fixed interest rate, regardless of Euribor
- The start of the calculation period can be in the future or only for part of the loan repayment term.
Risks of agreeing to an interest rate swap:
- Changes in interest rate levels in the market do not affect the agreed interest rate; the transaction is executed according to the agreed terms
- Closing or changing the loan does not automatically terminate the interest rate swap; you must initiate it yourself
- When closing, the net present value of the product is calculated, which is paid by either the client or the bank, depending on the relationship between the agreed rate and the market interest rates at the time of closure.