Interest rate swap for hedging — still investment advice

If a foreign currency loan bears a variable interest rate, an interest rate swap is often a suitable hedge: the customer pays a fixed rate, the bank a variable one — an exchange intended to limit the risk of rising interest rates. Banks have often presented such swaps as pure financing optimisation, not as an investment. The BGH (Federal Court of Justice) clearly rejected this in a recent decision (BGH, judgment of 9.6.2026 – XI ZR 231/23).

What matters is an economic assessment, not the designation of the transaction. An interest rate swap is a financial futures transaction (Finanztermingeschäft): the parties' payment obligations depend on uncertain future interest rate developments, and there is no provision of capital for a limited period. Even if the swap is intended exclusively to hedge an existing loan, it therefore remains an investment decision — with the consequence that the stricter duties of investment advice apply, not the milder ones of mere financing advice.

This has tangible consequences. If the advising bank is at the same time the counterparty to the swap, it must disclose an initial negative market value structured into the contract — i.e. its own hidden, built-in profit margin, which places the customer in a mathematical loss zone from the outset. A mere reference to commissions or inducements received is not sufficient for this, as the BGH has clarified: inducements and negative market value are legally two different things. An exception to the duty of disclosure applies only if the swap is closely linked to a loan with a matching term existing with the same bank — it does not apply if the term differs or if a different bank is the lender.

Anyone who has concluded an interest rate swap to hedge a loan in recent years should have it checked whether they were actually informed about an initial negative market value — and whether the swap and the underlying loan really matched. Both can be decisive for claims for damages.