Interest Rate Swaps
An Interest Rate Swap is the exchange of one set of cash flows for another and it is one of the debt hedging mechanisms that KBC Bank Ireland offers through our Treasury and Capital Markets division.
At KBC Bank Ireland we understand that no business wants to be at the risk of volatile interest rate movements and so we offer products to guard against this. An Interest Rate Swap can do this, although it should be noted that it is a product that is generally only available to corporate and institutional clients.
The most common type of Interest Rate Swap is the exchange of fixed rate flows for floating rate flows to provide protection against adverse interest rate movement. This is a stand-alone product and is a contract in its own right. This product can also be used to protect depositors from falling interest rates. It provides the same protection as a fixed rate loan and the great advantage of this approach is that interest rate payments are known for the duration of the contract, thus removing volatility. However, there are downsides to this approach. For example, for the duration of the contract the client cannot avail of favourable interest rate moves. Additionally if a client terminates a loan, the Interest Rate Swap may not necessarily cease.
Our experts in the Treasury and Capital Markets division will be very happy to discuss this product with you in more detail if it is something that you believe may be advantageous for your business.
