Indexed Loan

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Indexed Loan

A loan with a payment that changes periodically. For example, the payment may increase if the Consumer Price Index rises to a certain level. Likewise, it may fall if the CPI drops. An indexed loan protects against risks such as inflation risk that would reduce the yield for the lender. Indexed loans are most commonly long-term loans as the changing payment reduces the uncertainty attached to any long term investment. See also: Variable-rate loan.
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Regarding loans, the effects of these changes are even more pronounced, as foreign currency indexed loans in the amount of over KM 10.5 billion since January have been classified as foreign currency loans.
Croatia's High Commercial Court has overturned an appeal by eight lenders that were sued over Swiss-franc indexed loans.
In the cash flow analysis, Fitch recognised the additional spread of IRPH indexed loans over the Euribor rate by adding a margin of 1% per year to these loans.
Commercial Loan Software System for the indexed loans of the Housing Finance Fund of Iceland to replace the current system.
Interests should be charged only from declining sum of the loan, while indexed loans should be prohibited, the National Bank said.
The quarterly measure of credit euroization (treating indexed loans as foreign currency loans) shows that it too was very high in this period, hardly varying at all.
The limit was lowered to 20% of the regulatory capital during the boom, and also there were efforts to better capture embedded options in some kinds of foreign-currency indexed loans. The limit was raised to 30 % of the regulatory capital during the crisis to give banks more flexibility to accept foreign currency deposits or loans without necessarily having to extend indexed loans.
Furthermore, and contrary to the popular view, real interest rates on indexed loans actually averaged slightly less than those on unindexed debt.
However, asset quality ratios could weaken, in Fitch's view, given the bank's SME focus, expansion into the potentially high-risk agro segment, material foreign currency loan exposure which is above the sector average (45% of gross loans, including foreign currency indexed loans), exposure to the potentially high-risk tourism sector and some Russian risk in the loan book (end-2015: 3%).
Calypso customers in Latin America are among the users and dealers of a range of asset classes including interest rate derivatives, settlement and non-settlement currencies, money market indexed loans, fixed income instruments, FX products and derivatives hedging, the firm said.
The rating agency noted that French RLGs have already negotiated with banks to progressively exit their EUR/CHF indexed loan contracts, and have had support from a EUR 1.5 bln state support fund set up in 2014 which has helped local governments cover the cost of converting their structured loans into conventional debt.
Moody's notes that over the past few years, French RLGs have already negotiating with banks to progressively exit their EUR/CHF indexed loan contracts, as well as have had support from a EUR1.5 billion state support fund set up in 2014 which has helped local governments cover the cost of converting their structured loans into conventional debt.