Swaps: a 1990s tool for management of financing

Article Abstract:

Companies can use swaps to lower the cost of financing, control risk, and better manage their balance sheets. An interest rate or coupon swap contract between two parties entails the exchange of interest payments on an agreed-upon amount, typically swapping a fixed for a floating rate. Companies are thus able to alter their exposure to interest rate changes. Defaults on swaps trigger an obligation for the defaulter to pay damages to replace the lost benefits of the swap to the other party. Companies can protect against the risk of default by netting interest payments, requiring collateral from the counterparty, using covenants, or using a bank to act as a principal in the transaction. Swaps provide companies with arbitrage opportunities and the ability to alter the terms of extant liabilities while lowering transaction costs and increasing flexibility.

Methods, Analysis, Finance, Corporations, Corporate finance, Managerial accounting, Swaps (Finance)

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FDIC insurance changes: how will they affect investors?

Article Abstract:

Federal Deposit Insurance Corp (FDIC) deposit insurance coverage may be substantially changed if FDIC proposals currently under discussion are approved. One basic trend has emerged: insurance coverage may be reduced significantly. A key proposal includes the reduction of total deposit insurance coverage to a maximum of $200,000 per depositor. Another proposal advocates the elimination of coverage for multiple family-type accounts and pension plan participants. A prudent way for investors to prepare for these possible changes in FDIC coverage is to check the creditworthiness of financial institutions, using the ratings provided by professional credit review services.

Insurance carriers, not elsewhere classified, Credit reporting services, Laws, regulations and rules, Services, Credit bureaus, Deposit insurance, United States. Federal Deposit Insurance Corp.

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