Interest rate swaps: first proposals are out!

Most interest rate swap clients are still awaiting a proposal. The latest reports of delays in the implementation of the Interest Rate Derivatives Recovery Framework are not yet very encouraging. Either way, for many, the Recovery Framework will mean that sooner or later they will receive a compensation offer from their bank. 

One year after the adoption of the Recovery Framework, the first SME customers have finally received a proposal. It's started. Deutsche Bank, which has already surrendered its Dutch banking license and has turned many customers away, was the first bank to send several proposals. Former Deutsche Bank swap customers who (want to) no longer have anything to do with this bank can still look forward to a farewell present.

Advances for the vulnerable customer
On 29 June 2017, the Netherlands Authority for the Financial Markets (AFM) published a progress report on the state of affairs. It is important that swapped customers who are currently experiencing difficulties ('Special Management') can receive an advance from the bank. Various banks have promised to send letters to some of these customers from September with an offer for an advance. Are you also a 'vulnerable customer' and have or had an interest rate swap? Then be aware of this!

Developments in case law interest rate swaps
In addition to the Recovery Framework, there are still plenty of developments in the case law on interest rate swaps. In a previously published judgment, it was emphasized that the bank has an obligation to provide the customer with sufficient information about the consequences of the security that the bank maintains for the negative market value of the interest rate swap. Some customers will have been hit harder than others by the consequences.

If a customer is of the opinion that there is damage that exceeds a compensation proposal based on the Recovery Framework, it is good to have this assessed. Upon acceptance of the proposal, which follows from the Recovery Framework, the swap file will be closed forever.

Homework in anticipation of proposal
For those who have or have had an interest rate swap, it remains important to do their homework. Some customers still think they can receive a maximum of €100.000 in total. This is incorrect. The maximum of €100.000 only applies to the general goodwill allowance. Depending on your file, various aspects can lead to a higher compensation. For example, if you have a special swap or if there are technical defects.

It is wise to take your pieces out of the old box to check how things were going and, if in doubt, to seek legal advice. A customer who does not have his file in order cannot know whether the proposal is correct. In addition, the compensation proposal letter will ask whether you wish to institute binding advice. You will then need to know whether binding advice is possible and/or useful for you.

If you had an (old) interest rate swap that was terminated before 1 April 2011, please note: the registration period ends on 30 September 2017!

Swap customers listed in public register
Finally, swap customers are warned that they are listed in a public register. There are indications that swap clients are being actively approached by 'advisors', who use this public address information and offer their 'assistance' for very high rewards (sometimes up to 25%). 

Even now that the Recovery Framework has already been established, and many SME customers will receive a leniency fee upon acceptance of the proposal, customers are approached in this way. So be careful who you work with and what costs are charged for this. It is possible that with such 'fee agreements' part of your compensation is unnecessarily skimmed off. For many swap customers, this is a significant amount and you will therefore have to be wary.

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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