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Definition of 'Swap Bank'
A financial institution that acts as an intermediary for interest and currency swaps. The function of these intermediaries is to find counterparties for those who want to participate in swap agreements. The swap bank typically earns a slight premium for facilitating the swap.
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Investopedia explains 'Swap Bank'
Generally speaking, companies do not directly approach other companies in an attempt to create swap agreements. Instead, swap banks coordinate the swap agreements for companies. In most cases, companies don't even know the identities of their swap counterparties.
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Learn how these derivatives work and how companies can benefit from them.
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Derivatives can reduce the risks associated with changes in foreign exchange rates, interest rates and commodity prices.
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