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Interest rate swap mis-selling scandal: Difference between revisions
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Bear in mind what the businesses of middle England want from their banks: finance, for a predictable term, at a predictable cost. | Bear in mind what the businesses of middle England want from their banks: finance, for a predictable term, at a predictable cost. | ||
We take it as generally axiomatic that if you want to give, or take, back your money at any time, interest will accrue at a variable rate, and if you want to lock in the borrowing or lending for a term, interest will accrue at a ''fixed'' rate. | |||
And remember, in the good old days — specifically before [[Swap history|1981]] — if you wanted “exposure” to an interest rate, you had to actually borrow, or lend, money. But England’s businesses didn’t want “exposure to interest rates”. They wanted ''money''. Capital. Indeed, before 1981 the idea of “isolated exposure to interest rates” would have seemed more or less incoherent, the same way a shadow seems incoherent, without the boy who cast it. | And remember, in the good old days — specifically before [[Swap history|1981]] — if you wanted “exposure” to an interest rate, you had to actually borrow, or lend, money. But England’s businesses didn’t want “exposure to interest rates”. They wanted ''money''. Capital. Indeed, before 1981 the idea of “isolated exposure to interest rates” would have seemed more or less incoherent, the same way a shadow seems incoherent, without the boy who cast it. | ||