Swap Break Clauses
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Risk management.
Swap break clauses give the right to a bank as the seller to call for termination or re-pricing periodically during the life of a long term swap.
They were initially sold as a means of managing the fixed rate leg of a long term interest rate swap because banks could price the long term swaps as medium term deals based on the time period to the next break date.
Post-2008 regulation means they now carry a capital cost for banks and termination or re-pricing has been known to be called by the bank.
