Interest rate derivative terminated? Attention: September 30th is approaching!

Many SME clients, who have or had an interest rate derivative, are anxiously awaiting a proposal from the 'Recovery Framework for Interest Rate Derivatives'. According to the latest reports, there are already some customers who have already received a compensation proposal or an advance in advance.

Because the Recovery Framework still causes headaches for the banks, and the accountants engaged by them, its implementation has been delayed. This does not alter the fact that a number of swap customers should pay attention to the deadline of September 30, 2017.

When should you register your interest rate derivative with your bank?
A customer who prematurely terminated his interest rate derivative before 1 April 2011, has terminated (while it was entered into after 1 January 2005 and would continue until after 1 April 2011), he must register his interest rate derivative with his bank if he wants this derivative to be included in the Recovery Framework.

A customer who has paid a lump sum for an interest rate swap in the past can then still receive compensation via the Recovery Framework. This also applies to customers who have already made an arrangement with the bank in the past. The date of September 30, 2017 is crucial. If a customer should have registered his interest rate derivative, but has not done so, he is missing out.

Attention is important
Caution is advised for this customer group. Many customers have received a letter about the Recovery Framework, but an information letter does not mean that the interest rate swap will also be included. In the letters, the bank often does not make any commitment, but it is stated that the customer must register an interest rate derivative that has been terminated prematurely with the associated data.

It is also not always advantageous to register old interest rate derivatives that have been terminated. In a number of cases, it is even disadvantageous to notify an interest rate swap that has ended prematurely. This is because the bank can then settle this, so that the compensation amount is actually lower. It is therefore not advisable to blindly register your interest rate swap. It should be clear that the consequences will work in your favor.

Furthermore, swap clients, who fall within the scope, are not required to join swap organizations or foundations to be eligible for the Recovery Framework. Last month, the NMV also warned about the consequences of price agreements (on the basis of 'no cure no pay') that some parties make with victims. As a result, customers may unnecessarily have to relinquish a large percentage of their compensation (sometimes up to 25%).

Deadline is getting closer
Anyway, the deadline of September 30, 2017 is fast approaching. Customers who have terminated an interest rate derivative in the past (before 1 April 2011) must therefore ensure that they do not allow this term to expire. If you should have reported, you will no longer be able to receive compensation from the Recovery Framework.

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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