Interest Rate Swap, IRS

Interest rates swaps (IRS) are instruments for managing interest rates that may be of great use for companies who have liabilities with floating interest rates. Interest rates swaps allow safeguarding your company’s cash flow against interest rate fluctuations by exchanging the floating rate with the fixed rate.

Swaps may be used in combination with any financing irrespective of whether it’s from Swedbank or any other lender. Your loan will still be based entirely on the contract between you and your lender.

This instrument only affects the reference rate of your loan (such as EURIBOR, LIBOR). The entry into or termination of a swap transaction will not in any way affect the fees agreed in the loan agreement (e.g. for early repayment of loan or changes in repayment schedule) or any other arrangement between you and your lender.

Possibilities:

• locking in the interest rate for the entire or any part of your loan period;
• locking in the interest rate for the entire or any part of the amount of your loan;
• locking in the interest rate on a new or an existing loan;
• including personalized amortisation schedule;
• altering, extending or terminating the interest rate swap transaction without any effect on your loan agreement.

Advantages of using interest rate swaps:

• greater certainty for future liabilities;
• reduced credit risk and potential costs for the company;
• no fees or charges.

Risks associated with interest rate swap transactions:

• once the rate is locked in through interest rate swap, you lose the chance to benefit from falling interest rates on the market;
• in case of early termination of the transaction, the customer may incur expenses or earn income, the size of which depends on interest rate market situation then prevailing.

Requirements:

• holding a current account with Swedbank,
• signing the Agreement for Financial Market Transactions with the bank.

Source: https://www.swedbank.lv/en/pakalpojumi_uznemumiem/procentu_likmju_ierobezosanas_instrumenti/