Interest Rate Risk Management

A range of options to provide protection and reduce uncertainty.

 

Borrowing funds for your business on a variable interest rate can leave you exposed to the uncertainty of rising interest rates. Allied Irish Bank (GB) offers a range of products which can help you manage this risk, and provide certainty, protection or some flexibility.  Our experienced team can guide you through the risks and complexities of these type of Interest Rate derivatives and help you decide on an appropriate strategy to manage your interest rate risks.

 

There are three main types of interest rate risk management products available:

 

 

1.  Interest Rate Swap

An Interest Rate Swap is a standalone product that provides protection from rising interest rates, but does not allow for participation if interest rates fall.

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    Features & Benefits

    • Enables you to fix the interest rate costs of a variable rate loan.
    • There is no upfront premium or cost to enter into an Interest Rate Swap.
    • There may be substantial break costs if the Interest Rate Swap is terminated early.
    • The product is portable and can be moved to another bank
    • An Interest Rate Swap will be linked to your loan and will be secured under the facility documentation.

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2.  Interest Rate Cap

An Interest Rate Cap is a standalone product that provides protection from rising interest rates and unlimited participation if interest rates fall.

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    Features & Benefits

    • Allows you to cap the interest rate costs of a variable rate loan at a pre-agreed interest rate.
    • Reduces uncertainty by providing you with a known maximum interest rate cost over the contract term.
    • There is an upfront premium payable to the bank to take out the cap protection
    • There are no break costs if an Interest Rate Cap is terminated early but there may only be limited residual value.
    • The product is portable and can be moved to another bank.

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3.  Interest Rate Collar

An Interest Rate Collar is a standalone product that provides protection from rising interest rates and some flexibility to participate if interest rates fall.

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    Features & Benefits

    • Reduces uncertainty by providing you with a known maximum and minimum interest rate which you may pay on a variable rate loan over the contract term.
    • An upfront premium may be payable or the product can be structured for zero upfront premium.
    • There may be substantial break costs if the Interest Rate Collar is terminated early.
    • The product is portable and can be moved to another bank
    • An Interest Rate Collar will be linked to your loan and will be secured under the facility documentation.

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Talk to Us

Simply call +44 (0)20 7309 3170 (lines are open Monday to Friday 8am to 5pm excluding Bank Holidays). We’ll be happy to answer any questions you might have about our Interest Rate Risk Management Services.

 

You can write to us at:

 

Allied Irish Bank (GB)

Customer Treasury Services

St Helen’s

1 Undershaft

London

EC3A 8AB

 

 

Help and Guidance

 

Help Centre

For all service related queries please visit our Help Centre.

 

 

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