BankBryanCave.com

Bank Bryan Cave

Interest Rate Swaps

Main Content

New Broad Treasuries Repo Rate “Best Practice” Benchmark

June 29, 2017

Authors

Matthew D'Amico

New Broad Treasuries Repo Rate “Best Practice” Benchmark

June 29, 2017

by: Matthew D'Amico

On June 22, the Alternative Reference Rates Committee (the “ARRC”) identified a broad Treasuries repo financing rate (the “Broad Treasuries Financing Rate”) that, according to the ARRC, in its consensus view represents best practice for use in certain new U.S. dollar derivatives and other financial contracts.

The work of the ARRC grew out of the past instances of manipulation of the LIBOR market which caused a loss of confidence in LIBOR – particularly as it had previously been determined and reported – as a reliable interest rate benchmark.  That led the G20 to instruct the Financial Stability Board to review broadly-recognized interest rate benchmarks and devise a plan to ensure that the construction of these benchmarks are sound and used appropriately in the markets.  According to the Working Group

Read More

Swaps, Dodd-Frank and the Community Bank

July 24, 2013

Authors

Dan Wheeler

Swaps, Dodd-Frank and the Community Bank

July 24, 2013

by: Dan Wheeler

Despite the breadth and complexity of Dodd-Frank regulation of derivatives, there are comparatively few key regulations that affect an interest rate swap offered by a typical community bank. This article provides an overview and a ray of hope that these regulations can be mastered by a community bank.

Less than 3% of banks under $1 billion in assets are engaging in interest rate swap transactions. Only 7% of all banks in the U.S. are doing so. Yet, virtually every community banker complains about losing good loans to larger banks offering long term fixed rate loans. Larger banks are only able to offer those fixed rate loans because they hedge the interest rate risk represented by a fixed rate loan with a corresponding interest rate swap. One would think that community banks would scramble to compete effectively by doing their own interest rate swaps.

A key reason

Read More

June 10 Deadline for Clearing Interest Rate Swaps

June 9, 2013

Authors

Dan Wheeler

June 10 Deadline for Clearing Interest Rate Swaps

June 9, 2013

by: Dan Wheeler

All community banks that currently engage in interest rate swaps (or are considering doing so in the near future) should be aware of the June 10, 2013 deadline for compliance by all financial institutions with the clearing requirement for interest rate swaps.

As background, Section 723 of the Dodd-Frank Act added section 2(h) to the Commodity Exchange Act and thereby established a clearing requirement for interest rate swaps.  (The term “clearing” refers to the process by which an intermediary is interjected between a bank and its swap counterparty.  A cleared swap is subject to continuous collateralization of swap obligations, real time reporting, additional agreements and other regulatory constraints.  It is generally a more cumbersome process than the typical “bilateral” swap directly between a bank and its counterparty, which is a purely private contractual arrangement.)  Under Dodd-Frank, it is illegal for a bank to enter into a certain swaps without clearing

Read More

Losing Good Loans to Larger Banks? Try an Interest Rate Swap

February 8, 2013

Authors

Dan Wheeler

Losing Good Loans to Larger Banks? Try an Interest Rate Swap

February 8, 2013

by: Dan Wheeler

Many community banks are reluctant to consider interest rate swaps due to perceived complexity as well as accounting and regulatory burdens. But, in a record low interest rate environment, the most desirable customers almost universally demand something that is hard for community banks to deliver: a long-term, fixed interest rate. Large banks are eager to accommodate this demand and usually do so by offering such a borrower an interest rate swap that, together with the loan facility, delivers the borrower a net long-term, fixed rate obligation and the lending bank a loan with an effective variable rate.

The alternatives to using swaps are not appealing. A community bank can limit its product offerings to only variable rate loans or short-term, fixed rate loans and thereby lose many good customers to larger competitors. The bank can offer a long-term fixed rate on the loan and then (a)

Read More
The attorneys of Bryan Cave LLP make this site available to you only for the educational purposes of imparting general information and a general understanding of the law. This site does not offer specific legal advice. Your use of this site does not create an attorney-client relationship between you and Bryan Cave LLP or any of its attorneys. Do not use this site as a substitute for specific legal advice from a licensed attorney. Much of the information on this site is based upon preliminary discussions in the absence of definitive advice or policy statements and therefore may change as soon as more definitive advice is available. Please review our full disclaimer.