Interest rate swap victims put to the test

Many interest rate swap customers have recently received a letter from their bank about the Recovery Framework for Interest Rate Derivatives. Despite the fact that the proposals should already be there by now, this has not happened to any customer yet.

This is now scheduled to be after the summer. Many are anxiously waiting for a proposal. Of course, the patience of many customers is tested. As legal advisor to the NMV and the Bank Complaints Reporting Foundation, I am closely involved in the process. Below is an update for the swap customers.

Isn't the recovery framework already final?
The Recovery Framework was definitively adopted on 19 December 2016. The banks then set to work drawing up their policy on the approach. The banks have also set up their own "factories" to work with the assessments. For example, Rabobank in Hilversum has set up a department with approximately 250 employees especially for assessing interest rate swap files.

Why is it taking so long?
Over the past period, the banks have not only been busy setting up their "factories", but they must of course also be able to apply the Recovery Framework correctly. Interest rate derivatives are complex financial products and many special constructions have been applied.

The Recovery Framework is an extensive legal-technical report. For most customers, the matter will still be very difficult to understand. It therefore takes a lot of time for the banks to train their employees for this. In addition, there are still "external file assessors" (large accountancy firms) who examine these files to check the work of the banks. These accountants will also have to understand not only the swap matter, but also the complex Recovery Framework.

In short: because interest rate derivatives are such complex financial products with many differences per file, the banks simply need a lot of time. This is indeed remarkable. Many banks have long denied that these were complex products and acted as if the customer had understood everything. 

The fact that the banks now need so much time makes it clear once again that the customer cannot be blamed for not understanding the product. Certainly not now that the sale of this product and the closing of it often had to be arranged during a cup of coffee.

Message from the bank
Many have already received a message from the bank with some general information about the state of implementation of Recovery Framework. Perhaps to the frustration of some, this letter does not contain much concrete about the consequences for their swap file.

For those who didn't get a message from the bank, make sure they haven't forgotten about you! Furthermore, the receipt of such a letter does not automatically mean that you fall under the scope of application. If there are reasons to doubt this, it is wise to have this checked.

Caution required
For the time being, it is planned that the proposals will roll out after the summer (third quarter) of this year. For customers who have no idea how their interest rate swap works, it is wise to delve into this now. This also applies to those whose interest rate swap has already ended. Although many may have little sense in this, it is recommended.

If the Recovery Framework in your file provides room for discussion, it can have major consequences for the outcome (read: compensation) if you have done your homework well. It is better to be well prepared for a proposal than to have to "find out" at that moment what it was all about. This is also in view of the acceptance periods that are linked to the proposals that will be rolled out in the future.

Also be alert to the person you turn to for advice. There are signs of "advisors" who do not properly explain how the Recovery Framework works and even actively approach customers with "no cure, no pay agreements" that can cost you unnecessarily large amounts of money.  

All in all: for many it will be a long summer. This does seem to be a reason to put your "swap affairs" in order, in anticipation of the compensation proposals.

Marianne Adama

Marianne Adema is a lawyer at Adema Advocatuur and Advice. She specializes in financial law, agricultural law and real estate law. Adema assists many agricultural entrepreneurs and has an advisory and litigation practice. She is also a legal advisor on various wind turbine projects.

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