especially legal entities

IRS - Interest Rate Swap - is an agreement to exchange the cash flows denominated in one currency, which are based on a fixed or flexible basis. Party A undertakes to settle with a party B an agreed-upon fixed interest off the nominal amount and this for a specific period and as of the pre-set due dates and, at the same time, party B undertakes to pay party B an agreed-upon variable interest resulting from the agreed-upon nominal amount and this for the pre-set period and as of the agreed-upon due dates.

From the legal point of view concerning swaps, the initial creditor and debtor relations of the parties involved do not change. This means that the subjects of the swap transaction remain fully responsible for their initial interests due (and/or they remain in the position of creditors of the interests due). Two working days before the start of the individual interest period, the variable interest rate is being fixed and a comparison is made with the fixed rate. At the end of the individual interest period, the settlement is done via one cash flow. The payment is done by the party, the swap interest rate of which is of a higher value, and the amount equals the differences between the mutually-to-be-offset interest payments. During the business duration, the parties may agree upon its cancellation. Upon the cancellation, the market value of the interest rate swap is being balanced by the lump sum payment, followed by the cancellation of the whole transaction and of all the future obligations. The payments of interests carried out before the date of swap cancellation are not returned. As for the swap cancellation date, the involved parties agree upon the price, for which they are willing to give up the transaction. The party, which is in an unfavorable (loss) position pays to the other party an agreed-upon sum (the swap market price) as of the date of the spot foreign currency and the swap deal is cancelled. If the swap were not cancelled as of the date of the interest payments' settlement, the due difference of the so-far accounted costs' and revenues' interests of the cancelled swap is a part of the swap market price. The deal is always concluded by telephone with the dealer of the Treasury Department and a  confirmation of the concluded deal with the parameters of the transaction is sent to the client.

Interest rate swap is of two types:

You can ask for this product/service at any KB Bratislava business center. For further information about this product/service, please contact your Relationship manager or write to us to our e-mail address koba@koba.sk.