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ARTICLE · 26 SEPTEMBER 2022

Evaluating A Bank's Interest Rate Swap

FTI Consulting
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A leading national bank (the "Bank") was sued by a large corporate client (the "Borrower") that had taken out several loan agreements and an interest rate swap ("IR Swap") to hedge the floating rate payment risk.

United StatesFinance and Banking
Franck Risler, Ph.D.
Franck Risler, Ph.D.

A leading national bank (the "Bank") was sued by a large corporate client (the "Borrower") that had taken out several loan agreements and an interest rate swap ("IR Swap") to hedge the floating rate payment risk. A team of experts from FTI Consulting was engaged by the Bank to review the IR Swap and act as an expert witness.

Situation

The Borrower entered a loan with the Bank, which grew significantly through multiple loan agreements and modifications. Two IR Swaps were negotiated between the Bank and the Borrower to hedge the floating rate payment risk of the loans. The Borrower alleged wrongdoing by the Bank in connection with the terms of the second IR Swap and its effectiveness in hedging subsequent loan modifications.

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