Interest rate hedging or swaps
In this sense, some very important rulings have been obtained due to their innovation, such as rulings offirst court cases in the country suspending interest rate hedge or swap agreements, or the first resolutionhanding down the ruling of annulment of a swap agreement.
Said rulings can be consulted at Expansión, Cinco Días, El Economista, El Mundo, El País and other financial pages and national press. For more information please consult our section of “NC in the media”
What is a swap?
An interest rate hedge or swap is an agreement whereby two economic agents —through a possible mediator—, exchange among themselves interest flows on a regular basis and during a pre-established time. These interest flows are calculated over a same notional principal, agreed upon in the transaction (notional value), specified in the same currency and obtained from different reference rates (variable and fixed interest rate)
It is a high-risk financial product designed for highly qualified investors who are fully aware of the risk situation in using said product.
Due to the same, community regulations establish laws that are more protective in nature, in which the entities that render investment services should provide their clients with an overview of the nature and risks of the financial instruments, taking into account the category of the client as retailer or professional.
The banking entities in this country have commercialised these products indiscriminately among companies and individuals, without providing proper information in order for clients to give their valid consent.
Requirements for correct marketing
- Pre-contractual phase: the banking company should facilitate all necessary information so that the client can duly provide informed consent to the same.
- Truthful, transparent, and clear information.
- Contractual phase: delivered to the client at the moment of signing, Framework Contract of Financial Transactions and interest rate hedge or swap Agreement in writing.
- Post-contractual phase: proper information regarding the evolution of the contracted product.
- Compliance with community regulations MIFID (entry into force in November of 2007)
- The client should have professional banking know-how regarding forecasting of interest rate evolution, as well as the evolution of the financial market.