The guidance pertaining to the transferability of the interest rate cap
is not included in SFAS 133, but rather in interpretative guidance.
In addition, the amount of interest expense would be subject to the interest rate caps
based on Moody averages.
On behalf of the consumer lobby, Proxmire resisted adjustable rate mortgages--he now admits he was wrong--and insisted that the deposit interest rate cap
Depending upon market conditions, it also would be possible to eliminate the variable-rate risk by purchasing an interest rate cap
and locking in the spread between the cost of the cap and the savings on the indexed/fixed-rate bonds, if any.
An increase of non- performing loans has already elicited worry from the International Mon- etary Fund (IMF), which has asked the CBK to be vigilant and requested that the Treasury remove the interest rate caps
as small banks and borrow- ers are facing a crunch time.
"We can't say for sure how the interest rate cap
will affect the banking sector [because] there is insufficient data available to us at the moment," the governor says.
Previously DEF had purchased an interest rate cap
of 10% on the $1,000,000 principal.
Interest rate caps
, floors and collars are illustrated and their risks explained in the first part of a two-article series on innovations in municipal capital markets.
While it is true that the global economy has lost momentum, Kenya's economic pains are mostly self-inflicted, and the solutions are readily available.For starters, Parliament must humbly accept to untie the hands of Central Bank by removing the interest rate cap
legislation and allow the banking regulator the space to apply the optimal monetary policy.
While typical Dutch deals address the resulting interest rate risk with a total return swap, this transaction features a 10-year interest rate cap
with a strike rate of 3.5%.
Fannie Mae's vice president of capital markets and trading Josh Seiff said, "Our December deal featured 96 of our ARM 7-6 (i.e., seven-year loan with six percent lifetime interest rate cap
) loans in group two--approximately USD637 million in collateral.