jamie_white•2h agoMost Upvoted

Watched a banker in Chicago misread a LIBOR swap contract last month and it cost the borrower $15,000

I was sitting in on a closing at a small commercial bank on Michigan Avenue when the loan officer skipped over a rate adjustment clause that triggers every 90 days instead of 180, and now I triple-check every single date in any floating rate agreement before signing. Has anyone else caught a hidden compounding term that seemed harmless on paper?

2 comments

2 Comments

annas872h ago

The part that always gets overlooked is the wording around "business days" versus "calendar days" in those trigger clauses. One bank I know defined business days as only Monday through Friday, but then excluded bank holidays, so a 90 day trigger could stretch to 95 or 96 days in practice. That small shift changes the compounding schedule enough to make the math come out different than what anyone expected. Your mileage may vary, but I've seen that wording eat up thousands in interest differentials when nobody bothered to count the actual days on a calendar.

john_cooper1h ago

That 5-6 day difference in compounding really opened my eyes.