Rabobank in talks with clients on derivatives

Business clients with financing and an interest rate derivative will be invited by their local Rabobank this year for a review meeting. If clients themselves contact the bank before then with questions on interest rate derivatives, an appointment will be made with them immediately.

Rabobank provides banking services to almost 800,000 business clients. Around 1% of those clients (8,000) have an interest rate derivative. The bank annually assesses the individual position of business clients who have financing and an interest rate derivative. There is a clear focus on this product in a review meeting with business clients with an interest rate derivative. Rabobank is thereby implementing the reassessment of interest rate derivatives in the SME segment as desired by the Netherlands Authority for the Financial Markets (AFM) and by politics.

Rabobank offers interest rate derivatives for business clients seeking to limit interest rate risks on floating-rate (Euribor) loans. Clients can deploy an interest rate derivative to keep the interest expense at an acceptable level. The interest rate derivative does what it is designed to do: limit the interest rate risk and reduce uncertainties for the client. A proper match between the derivative and the loan is essential, however. Sometimes they may prove to be mismatched in an individual case or the client may not be sufficiently aware of how the product works. In those situations, the bank will engage in consultation with the client to find a solution that meets the needs of the client concerned.

Review meeting

In the review meeting, the bank will ascertain whether the term and the principal of the derivative are still a sound match for the client’s current and future situation. Before entering into a transaction for an interest rate derivative, the bank will establish the extent of the client’s knowledge and experience concerning derivatives and whether the client understands the product and its operation. The mark-to-market value of the derivative is also discussed in the review meeting, how it is determined and what the consequences may be in the event of early termination. The conclusions of the review meeting are documented in a meeting report.

Customised solution

Rabobank exercises due care in assessing complaints, or if there are questions on the suitability of the interest rate derivative. If it becomes clear that a contracted derivative no longer matches a client’s requirements, the bank will together with the client seek a solution that matches the client’s needs. This can vary from restructuring to terminating the transaction, a combination of these or partial or full compensation. In all cases, the focus is on a customised solution taking all circumstances of the business concerned into account. To safeguard the integrity of its procedures and to ensure that like cases receive like treatment, the local Rabobanks are supported by a central Derivatives Expertise Team.

In seeking a customised solution, the bank will do justice to the client’s interests. If the bank is found to have made mistakes, the bank will bear the costs of any damage or loss in full or in part. If the bank has acted correctly but a client nonetheless wishes to modify the derivative, the costs involved will be borne by the client.

Rabobank will do its utmost to reach a customised solution together with the client. Experience shows that the bank and the client are successful in doing so in the vast majority of cases. If the bank and the client fail to agree on a solution, the client can submit a complaint via the bank’s general complaints procedure (link). Complaints can also be submitted to the central Derivatives Expertise Team via an e-mail to: expertiseteam.derivaten@rabobank.nl. A client can always take the matter to court if he does not agree with the way the bank handles a complaint. In addition the Dutch Banking Association (Nederlandse Vereniging van Banken, or NVB) is working towards a readily accessible appeals procedure at the Financial Services Complaints Board (Klachteninstituut Financiële Dienstverlening, or Kifid).

Planning

Rabobank will hold a review meeting in 2014 with its business clients who have financing and an interest rate derivative. It expects to have held all these talks by the end of the current year. Clients with a more complex derivative or clients in special administration will be invited with priority. This is a relatively small group of clients.

Questions

Do you have an interest rate derivative and do you have questions about it? If so, please contact the account manager of your local Rabobank. If you are not satisfied with the way your question is handled you can contact the central Derivatives Expertise Team via expertiseteam.derivaten@rabobank.nl.

For more information on derivatives, please click here.