Interest Rate Floor for a Depositer

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Related Information:

Fluctuations in interest rates affect all of us. From a business perspective, movements in interest rates can have a significant impact on business performance. This is true whether the business is cash rich (i.e. a depositor) or relies on bank funding (i.e. a borrower). In both situations, finance managers can manage the interest rate risk to safeguard the business from an adverse move in rates.

How an Interest Rate Floor for a Depositer works:

It is a contract to compensate a client if interest rates fall below an agreed benchmark rate over an agreed period.
The company must pay an up-front non refundable premium.
This guarantees a minimum return on a deposit.
The business is free to enjoy the benefit of higher rates (in comparison to a fixed rate deposit).

A Floor premium is dependent on three factors:

Strike price - a higher 'floor' rate is more expensive than a lower 'floor' rate.
Period - a longer 'floor' period is more expensive than a shorter 'floor' period.
Market volatility - floors are more expensive at times of volatility in interest rate markets.

For Depositers, management of an interest rate risk can:

Create certainty of interest returns.
Ensure accurate forecasting and budgeting.
Safeguard profitability (or competitiveness).
Protect against falling interest rates.

Local businesses should consider formulating a strategy to manage interest rate risks. At First Trust Bank we offer a comprehensive suite of interest rate risk services and professional guidance that help businesses improve their own risk management practices.

For Further Information:

First Trust Bank customers should contact their branch for further details on Interest Rate Floors (Non First Trust Bank clients should contact their closest branch). Interest Rate Floors are only available for deposits of £250,000 or more. Terms and conditions and eligibility criteria will apply.

For further informationon Interest Rate products for borrowers and depositers please refer to the Related Information section.

Legal Notice

Terms and Conditions apply and are available on request.

First Trust Bank is a trademark of AIB Group (UK) p.l.c. (a wholly owned subsidiary of Allied Irish Banks, p.l.c.), incorporated in Northern Ireland. Registered Office, 4 Queen's Square, Belfast, BT1 3DJ. Registered Number, NI 18800. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. First Trust Bank is covered by the Financial Services Compensation Scheme, established under the Financial Services and Markets Act 2000.

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