Introduction
Interest rate swap refers to the operation of converting the debtor's own floating rate debt into fixed-rate debt, or converting the fixed-debt into floating rate debt according to the interest rate trend in the international capital market.
Features
1. After borrowing foreign exchange loans, enterprises may convert floating rate debt into fixed rate debt, or fixed rate debt into floating rate debt, with a view to avoid losses caused by interest rate fluctuation, or to lower interest rate costs, or to fixe their own marginal profits.
2. This product can be used to reduce customer borrowing costs, or to avoid the risks caused by interest rate fluctuation, and to fix their own marginal profits.
Target Customers
Corporate customers with foreign exchange liabilities or on-lending, issued or not issued by Bank of China.
Process
1. Agreement signing: before conducting the business of interest rate swaps with Bank of China, customers need to sign the Master Agreement of Derivative Transactions and the Application Form of Interest Rate Swaps.
2. Deposit implementation: before conducting the swap trade, customers engaging in such a product must have credit supports or provide a certain amount of cash as the security deposit to the customer relations department.
3. Inquiry: customers shall inquire from Bank of China about the price by providing all the transaction details in the form of written applications.
4. Completion of the transaction: once the transaction is concluded, Bank of China shall provide transaction confirmation to the customer.
5. Settlement: actual settlement shall take place on every–coupon exchange date.
Cases
To expand production scale, a company was ready to purchase a coal mine. The company applied to Bank of China for a loan of USD 25 million with the tenor of ten years and the interest rate of USD 6 months LIBOR +100bp. At that time, the USD interest rate was at history low, the company fixed the interest rate at 3.50% for all future repayment in ten years by conducting foreign exchange interest rate swap, so as to avoid interest rate increase in the future and the sequent substantial raise of corporate interest costs.
Our Advantages
1. The earliest bank to start up interest rate swaps business on behalf of corporate customers in China.
2. The Bank has the ability to calculate and quote prices for such a product.
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