Greenclose v National Westminster Bank plc: Difference between revisions

Interest rates were even lower in 2012, and the collar was massively out of the money for poor old Greenclose, now facing the ugly prospect that it might be extended for seven more years. Of course NatWest wanted to extend its collar, even though interest rates presented no real risk to Greenclose (four years later, they are lower still), but because they would make a ton of money. Ironically, because the collar significantly increased Greenclose's running interest costs, extending it would ''increase'' the very risk of insolvency NatWest first required the option to guard against.  

Now let’s be clear here: this was fair enough: NatWest had priced its lending operation so as to avoid this risk. It would be bad business for a bank not to exercise a valuable option. But all the same, it still managed to look like a big, bad bank.