Cross currency swap

• 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
  
  

This document does not represent an investment recommendation under Regulation (EU) No. 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse. Moreover, nor does it represent investment advice pursuant to Act No. 256/2004 Coll., on Capital market undertakings, as amended. The information specified herein shall not be considered an offer to purchase or sell any investment instrument or any other solicitation or invitation regarding the purchase or sale thereof. 

By law, Komerční banka, a. s. may not provide legal or tax advice. Before investing, clients should carry out their own risk analysis in terms of legal, tax, and accounting consequences, without relying solely on the information included in this document and, if necessary, consult tax or other advisors. 

Komerční banka, a. s. assumes no liability for damage incurred as a result of the use of this document or any information contained herein in excess of any liability foreseen by the applicable legislation. Each investor shall adopt their own informed decision regarding the investment suitability, as the investment instrument specified herein may not be suitable for all investors. 

Past performance of investment instruments is not necessarily indicative of future performance. Expected future performance depends on premises that may not materialise. Investment instruments and other investments are associated with different investment risks, whereas investments may fluctuate in value and even the initially invested amount may not be fully recovered. Furthermore, investment instruments denominated in other foreign currencies are also exposed to risks arising from changes in foreign exchange rates, with potential positive or negative impact on investment instrument prices and consequently the investment returns. 

Employees of Komerční banka, a.s. and of other companies of the same financial group, including their close persons and authors of this document, may – from time to time – trade in or hold the investment instruments described herein or derivatives derived therefrom. This document shall not be binding on Komerční banka, a.s. or other companies of the same financial group in connection with the provision of their investment services to their clients. 

This document has been issued by Komerční banka, a. s. – i.e. a bank and an investment firm within the meaning of the applicable legislation. As such, it is subject to supervision by the Czech National Bank. 

This site containing investment products and insurance-based investment products is not intended for citizens or residents of the United States of America (USA) or for any “U.S. Person”, as defined in SEC Regulation S under the U.S. Securities Act of 1933. The investment products and insurance-based investment products described on this website are not registered under the U.S. federal securities laws or any other relevant U.S. state laws. Consequently, no investment products or insurance-based investment products may be offered or sold directly or indirectly in the USA, to or for the benefit of residents and citizens of the USA and/or U.S. Persons. This restriction also applies to residents and citizens of the USA and U.S. Persons who may access this website while outside of the USA. 

• 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
• 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
  
  

• Consult the Markets in Financial Instruments Directive
• Receive current information about financial market developments