Interest rate derivatives review: update

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In the final months of 2014, a letter went out to all SME customers who on 1 April 2014 had long-term interest rate derivatives with ABN AMRO. That letter contained information about the review process: an examination by ABN AMRO of whether the advice regarding the interest rate derivatives was appropriate and whether the instrument still suits the customer’s position.

Thorough analysis

A team of more than 100 strong are currently dedicating all their time to reviewing each and every customer file, using dozens of criteria to test each one. Specialists are examining the files in detail and analysing them thoroughly.

Facts and figures

In total, ABN AMRO has around 350,000 SME customers; approximately 4,500 of these have one or more interest rate derivatives. The total portfolio comprises around 6,000 of these derivative instruments. The bank is talking with businesses that have interest rate derivatives and that now find themselves in economic difficulties. The bank has received some 120 complaints from SME businesses holding interest rate derivatives.

Timeframe

The review of the files is scheduled to be completed by the end of the first quarter of 2015. The bank will contact customers during the second quarter in order to discuss the reviews. Where any evidence of problems has emerged, possible solutions will be discussed with the customer.

Background

Interest rate derivatives are financial products that allow businesses to retain control of their interest expense, by choosing to borrow at variable interest rates. The products are not simple to understand. The Dutch Minister of Finance has asked banks, in close liaison with the AFM, to examine whether the advice given about these products in the past was appropriate.

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