Interest Rate Swap Claims are considered a popular investment tool for individuals and companies in Sacramento. These financial transaction allows both parties to hedge or protect their investments, mainly through the action of swapping their interest rates with each other.
A Cross Currency Swap has many benefits. Individuals and companies can use interest rate swaps to more or less fortify their financing options. Interest rates are subject to market changes; interest rate swaps simply help companies and individuals protect investments against the market’s volatility during specific periods of time.
Although interest rate swaps provide individuals and businesses benefits, the market for interest rate swaps can be dangerous.
Mis-selling interest rate swaps
According to the Financial Services Authority (now the Financial Conduct Authority and Prudential Regulation Authority), at least ’40,000 small to medium sized businesses were subject to mis-sold Credit Default Swaps in the United Kingdom.’
Due to that recent data, small and medium businesses need to start recognizing whether banks and other financial institutions (like a London clearing house) may mis-sell interest rate swaps to them.
In most cases, financial institutions are said to mis-sell interest rate swaps to customers when they fail to explain the risks of the Swap Rates during the point of sale or follow up. In contrast, fixed rate business loans are commonly confused as a mis-sold interest rate swap.
The All Square Treasury reported mis-sold swap rate transaction as having the following characteristics, particularly if a bank:
- Failed to specify that a loan and interest rate swap were separate products.
- Failed to specify possible alternatives for interest rate swaps.
- Failed to specify whether the interest rate for the swap rate transaction was separate the payable margin on a loan.
- Failed to specify what would happen if interest rates fell (to current levels).
- Didn’t provide actual examples of an interest rate swap’s performance via a presentation or email.
- Failed to provide an explanation of the swap rate transaction’s termination costs.
It’s important for banks and other financial institutions to explain the terms and conditions of their executed interest rate swaps. As a financial tool, interest rate swaps do possess volatile characteristics, which can ultimately affect the financial livelihood of a business or individual if they’re not informed.
Banks and other financial institutions may be held liable for poorly explaining or executing an interest rate swap. Today, several investigations into institutions who have mis-sold interest rate swaps have been conducted in the United Kingdom. It’s up to consumers themselves to use that information to decide whether they want to work with specific institutions or not.