Cross Currency Swap

An agreement to exchange principals of two currencies and associated interest cost.

How may we
assist you? 

Prevent risks associated
with interest rate
fluctuations

Negotiate interest rates for up to a year.

Execute transactions on telephone at any time

We will help you select your optimal strategy

Choose one of several product varieties

Keep track of parameters of your transactions

USEFUL INFORMATION

  • Agreement to exchange principals in two currencies and associated interest payments 
  • It is intended for individuals and legal entities – both Czech and foreign residents
  • One party (A) agrees to purchase financial funds in currency 1 from another party (B) for certain amount in currency 2 – at a fixed date
  • At the same time, party A agrees to resell the same amount in currency 1 for certain amount in currency 2, at the same exchange rate and at a fixed later date; however, no more than one year from the trade date
  • During the contract term, both parties exchange interest payments on currencies they initially purchased from each other 
  • Floating interest rates are fixed and compared to a fixed rate (for fixed to float CCS) or two floating rates are fixed (for float to float CCS) two business days prior to the start of individual interest periods
  • Transaction is settled at the end of interest periods
  • Consult the Markets in Financial Instruments Directive and receive current information

Cross Currency Swap cancellation 

During the contract term, counterparties may agree on CCS cancellation.

  • When cross currency swap is cancelled, its market value is settled by means of a one–off settlement, the whole transaction is cancelled, together with all future liabilities – interest payments made prior to CCS cancellation are not refunded
  • As of the CCS cancellation date, parties agree on a price at which they are willing to withdraw from the transaction
  • Losing party pays the agreed amount (CCS market price) to the other party at the spot value and the transaction is cancelled
  • In case CCS is not cancelled as of an interest payment settlement date, any unsettled difference of interest rate income and expense from the cancelled swap settled to date shall be included in the swap market price
  • Potential profit or loss from interest rate transactions is affected by interest rate fluctuations
  • Losses may be incurred due to the fact that clients find themselves in a disadvantageous position during individual reference periods – i.e. swap payments made by them exceed payments made by the bank
    • In this case, clients pay a difference of the two payments to the bank
    • For clients, this loss represents hedging cost, provided the transaction was used as hedging
    • Hedging protects clients from significant interest rate fluctuations that could result in substantial financial problems