What is Interest Rate Swap?
Refers to commercial transactions in which an exporter changes floating interest rate to fixed interest rate or fixed interest rate to floating interest rate for an asset or liability. Interest rate swaps only change the structure of interest payments, there is no change in the amount of notional.
What is the Product’s purpose?
It is aimed to protect the exporter against the interest rate risk arising from the increase/decrease in interest rates in the markets.
What currencies can be used for the transaction?
The exchange rates that can be subject to the Interest Rate Swaps are US Dollar, Euro and other currencies to be decided by Eximbank.
What are the Maturity and Transaction Limits?
Exporter’s maximum derivative trading limit is limited to 50 percent of the general limit allocated to the exporte or to 25 million US Dollar, whichever is less.
The minimum transaction amount that the exporter may request for an interest rate swap is 1 million US Dollar and equivalent currencies.
The maturity of interest rate swap is minimum 3 years and maximum 10 years.
Between which hours can the transaction be made?
Interest rate swaps can be made between 09:30-15:30. The transaction maturity and settlement dates can not be on official holidays for the currencies concerned.
What is the cost?
No transaction fee or commission will be paid to the Bank for the interest rate swaps.
To make a transaction or for further information; You can contact us at +90 850 200 55 00 for any questions.
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In order to benefit from the Interest Rate Swaps;
It is required that the Exporter’s information is held within the bank, a “General Loan Contract” is signed between the Exporter and the Bank and that the necessary collateral have been established within the Bank,
A “Derivative Products Framework Contract” and the “General Risk Notification Form” and the “Over-the-Counter Derivative Transactions Risk Notification Form”, which are annexes to this contract must be signed between the Exporter and the Bank and the “Compliance Test” must be filled.
The Exporters which currently registered within our Bank;
Signing the “General Loan Contract”, and following the derivative transaction limit allocation; along with the “Derivative Products Framework Contract” and the “General Risk Notification Form” and the “Over-the-Counter Derivative Transactions Risk Notification Form”, which are annexes to this contract, signed in 2 copies, authorized signatory lists with notary certification belonging to the individuals who are authorized to represent and bind the company and that have their signatures on the contract must be delivered to the Treasury Operation Directorate by hand and/or via mail-courier.
Since the risk of not fulfilling the exporter’s obligation in Interest Rate Swap Transactions is not guaranteed, there is loan risk for these contracts. The Bank requests initial collateral from the Exporter for this risk.
“Bank Definite Guarantee Letter”, “Cash Pledge” or other collateral types that the Bank deems appropriate are acceptable. In determining the TL equivalent of the collateral amounts that will be established, Türk Eximbank’s currency buying rates will be used. For the related transactions, within the derivative transaction limit, separate collateral will be established for each transaction. Each transaction’s maturity is limited to 10 days prior to the maturity of the collateral provided. The initial and maintenance collateral level is determined by the Head Office on transaction basis.
The amount that must be provided by the Exporter as collateral for the Bank to make an Interest Rate Swap transaction is the initial collateral. The initial collateral level changes with the maturity of the transaction;
3-4 Years (1095-1824 Days) : %4,00
5-7 Years (1825-2919 Days) : %6,00
8-10 Years (2920-3650 Days) : %8,00
That is the lowest level at which the initial collateral can be decreased as a result of the interest rate fluctuations in the market during the period of the Interest Rate Swaps. The maintenance collateral is 50% of the initial collateral.
In case the total collateral held in the account of the exporter falls below the maintenance collateral, the exporter is required by the Bank to complete the amount of the collateral at the initial collateral level. This request is named as “Margin Call”.
For example, assume that our exporter has a derivative limit of USD 100.000. If the exporter wants to make an Interest Rate Swap of USD 1.00.000 at 5 years maturity, USD 40.000 (%4) initial collateral will be established. By deducting from the Exporter’s derivative transaction limit, USD 60.000 will remain.
As a result of daily fluctuations in the markets, In case the initial collateral of 40,000 USD falls below the maintenance collateral level of 20,000 USD, the collateral deficiency of USD 20.000 will be completed by deducting from the remaining USD 60.000 derivative transaction limit of the Exporter. If no collateral has been established for the USD 20.000 maintenance collateral, the exporter will be required to provide maintenance collateral.
- The Exporter whom a derivative limit is allocated and collateral is established sends the “Transaction Form” that includes the related conditions and signed by the individual(s) authorized to represent the firm.
- Upon execution of the transaction, the necessary initial collateral amount is blocked and reduced from the collateral amount provided by the Exporter.
- Following the blockage of the collateral amounts, the Exporter does not have the right to renege on the transaction or the right to change the transaction. The Bank reserves the right to reduce the transaction amount.
- The bank confirms the transaction result with the Interest Rate Swap transaction receipt which will be sent to the Exporter on the transaction day.
- The exporter sends the Interest Rate Swap Transaction Receipt to the Bank by writing “Notified and Accepted” to the Receipt signed by the individual(s) authorized to represent the firm.
- After the Bank has sent the original Interest Rate Swap transaction receipt to the address of the Exporter within 5 (five) business days at the latest from the transaction date, The Exporter delivers the wet-signed original of the Interest Rate Swap transaction receipt by mail or courier within 5 (five) business days to the Bank.
- In case the exporter reneges on the Interest Rate Swap transaction before the transaction date for any reason, the transaction is unilaterally assessed by the Bank according to the current market conditions, and the amount of penalty determined by the Bank on the basis of market conditions is collected from the relevant collateral of the Exporter.
- As a result of daily valuation, if there is profit in terms of the exporter, there is no change in the collateral amount.
- As a result of daily valuation, if there is loss in terms of the exporter, and the amount of the loss incurred does not fall below the level of maintenance collateral determined by the Head Office, a margin call will not be made.
- As a result of daily valuation, if there is loss in terms of the exporter, and the amount of the loss incurred falls below the level of maintenance collateral determined by the Head Office, the collateral level will be increased to the initial collateral amount.
- If the exporter does not comply with the margin call within 2 (two) business days, the default principles will go into effect and the exporters’ collateral will be compensated.
- At the Settlement Dates of the Interest Rate Swap Transaction, the amount of interest is declared to the Exporter. The new interest amounts for the following foating interest rates are calculated by using ICE and EBF interest rate and declared to the Exporter.
- If the settlement method is set as cash settlement, the absolute difference between the Floating Interest Amount and the Fixed Interest Amount ("Swap Settlement Amount") is calculated at the settlement dates. If the Floating Interest Amount is more than the Fixed Interest Amount, the Floating Interest Payer pays the Swap Settlement Amount or vice versa. In the case that the Exporter is the payer and the obligation is not fulfilled until the stated time, the default principles will go into effect.
- If the settlement method is set as physical settlement, the Bank calculates the floating and fixed interest amounts. The Exporter pays the amount until the stated time and following that the Bank pays the amount to the Exporters account.
- If the Exporter does not fulfil the obligation until the stated time, the default principles will go into effect and the exporter’s collateral will be compensated.
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