swaps - why?

Jul 10, 2005 2 Replies

I have swaps with rate refixing. Basically it's like deposit placed and taken without principal settlement. Only interest earned/spent is settled on some fixed dates (rate is floating and determined by bilateral agreement).



I look at some old gap reports, which list principal as settled on last rate refix date - together with last interest payment. Nobody can explain why principal is listed. Maybe because company is too big :-))



Can anybody tell me what could be the reason? I would expect to see principal if at all on maturity date. With those swaps it is not settled anyway. Otherwise I'd expect just interest on swap. But no - every next rate refixing date both interest and principal are shown. Is such approach making life easier for some accountants? Or why at all?



Could it be that swap can be cancelled on rate refixing date? Never heard about that but who knows?



Alx


Unless a fancy banking IT system is used, it is likely that the swap transaction was recorded as a lending/ borrowing hence the principal shows up..

or the staff preparing the gap report was inadequately trained :o)

J, thanks for opinion

But I am more interested in "inadequately" point. What would be the adequate approach?

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