Interest rate swap customers, pay attention to the control letter

For many customers, including agricultural entrepreneurs, the interest rate swaps are finally behind us after years of frustration. Most interest rate swaps have ended. Many customers have received and accepted a compensation offer based on the bank's recovery framework. This also applies to many Rabobank interest rate swap clients.

Many of these customers will receive a control letter in the near future. Caution is advised, this control letter is very important. With this letter, the customer is informed by the bank about the outcome of the check carried out by an 'external file assessor'. This is a check that the bank's accountant has performed on the interest rate swap offer.

This check has been made mandatory by the Netherlands Authority for the Financial Markets (AFM) and should have been carried out initially before making an offer. Due to the need to speed up the payment procedures, these control letters are now sent afterwards. And so after customers have accepted the offer. 

Last chance for binding advice
After the outcome is announced with this control letter, the customer still has a limited period (4 weeks) to submit a binding advice to the so-called Derivatives Committee. Now many customers are undoubtedly thinking: but haven't I already accepted the offer? In that case it can still be used. If the file offers an opening for this, the submission of binding advice can be very interesting. 

Several subjects can be submitted to the Derivatives Committee. The advantage of submitting a request is that it does not jeopardize the offer. If the request is declined, you will already retain the offer you accepted as a customer. If, on the other hand, the request is granted, the bank must correct the submitted aspect. In particular, the question of whether a loan is rightly linked to the interest rate swap can have a significant impact on the amount of the final payment. 

Still 'extra' compensation in case of correction offer
Various statements in my practice have shown that it can be worthwhile to make use of this. A recent ruling ruled that the interest rate swap had to be repaid in full because the bank had incorrectly linked the loan to the interest rate swap in the offer. This is because this loan was provided some time later than when the interest rate swap was concluded.

The so-called three-month criterion that applies on the basis of the recovery framework is important here. A bank is therefore not allowed to simply link loans that were granted well after the interest rate swap was concluded to the interest rate swap. Practice has shown that customers often do not know this and that this is not paid attention to during an audit by their accountant. It is too quickly assumed that the bank has done this well in the offer. 

Additional Over Hedge Compensation
If the bank has linked a loan 'too much' to the interest rate swap in the offer, it can be very attractive to submit this to the Derivatives Committee. As various judgments have shown, this can lead to additional overhedging compensation or sometimes even a full repayment of the interest rate swap and thus a much higher compensation than the original offer.

There are, of course, other aspects that can lead to additional compensation. It is up to the customer to take action on this. Now that the control letter offers Rabobank customers one last option to do something about this, it is highly recommended that you take a closer look at this.

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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