Reassessment of interest rate derivatives – status update
With the dedication of several hundred employees, Rabobank is working carefully on the reassessment of interest rate derivatives held by approximately 8,000 SME customers with a loan. This is partly due to the review by the AFM of the interest rate derivative service provided by banks to non-professional SMEs. By the beginning of 2015, Rabobank had completed its reassessment for 1,300 ‘vulnerable SME customers’ with an interest rate derivative. These are SME customers with an interest rate derivative that are under Special Asset Management, those with a complex interest rate derivative or those that are over-hedged, meaning that their interest rate derivative has a mismatch with either the term or size of the underlying loan. Rabobank is conducting an additional reassessment for the other 6,700 customers in 2015, after the interest rate derivative was already discussed with the customer in the annual review interview in 2014. Most of this additional reassessment has now been completed.
The findings so far
The reassessment reveals that the product is suitable for many customers. The derivative has adequately met the needs of the customer for whom it was arranged, namely the hedging of interest rate risk. Minor findings that do not affect the customer emerged from the review of various customer files, and these will be corrected.
For a small number of customers, the advice given with respect to interest rate derivatives was not appropriate. The bank will engage in a dialogue with these customers in order to find a solution that suits the customer’s specific situation. The bank has already reached a solution with some of these customers, and all the customers in this group will be offered a solution this year. There are also customers who were advised appropriately, but we see good reason to contact them for an additional interview. Solutions can range from providing information again or explaining the situation to restructuring the derivative, converting it to a fixed interest rate, or a combination of the above. If the solution is needed due to a mistake by the bank and the customer has suffered a loss, the costs of this shall be borne by the bank.
Customers who do not find a satisfactory solution with the bank are free to take their case to the independent complaints institute Kifid or put it before the courts. Currently, around 20 customers have submitted a complaint to Kifid, and there are 31 cases before the courts.
SME customers with a loan including an interest rate derivative will be informed by their account manager at their local Rabobank regarding their individual reassessment. All the SME customers concerned will receive a letter stating the conclusions of the reassessment. If they so wish, customers will be given a further explanation in a personal interview. If the service provided was inappropriate, all such cases are followed up by an interview with the customer in order to find a solution. The AFM (Netherlands Authority for the Financial Markets) has published a guideline for such interviews with SME customers.
Rabobank will complete the additional reassessment for all customers by the end of 2015. If an inappropriate service has been provided, the bank will offer a solution to the customer concerned.
The bank will continue to provide updates on the progress of the reassessment of interest rate derivatives on this portal and on the business customers portal.
Customers with questions regarding their interest rate derivatives may at all times contact their local Rabobank, even if they have now expired. If the customers and the local Rabobank are unable to find a solution, customers can contact the central Interest Rate Derivatives Expertise Team at Rabobank.