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How to structure, launch, and build your interest rate swap program

  • Ben Lewis headshot


    Ben Lewis

    Managing Director
    Head of Sales

    Financial Institutions | Denver, CO


A borrower swap program is a tool to help banks compete for long-term, fixed-rate loans. Success starts with identifying goals, deciding how to resource, and building the program.

A borrower swap program is an effective and proven tool to help banks compete for long-term, fixed-rate loans. However, starting from zero can feel daunting, and many banks experience difficulty in determining how to structure and source their program for success. The first step is to identify your program’s goals. From there, you can decide how to resource, and find the talent to launch, build and grow the program for short- and long-term success.

What is your swap program strategy and do you have tangible goals for the program?

First things first: determine your strategy and goals. Will you use the program to compete and win more long-term, fixed-rate loans, hence growing loan originations? How many trades do you plan to do annually? Is this based on loan origination analysis? Perhaps instead of going after your competition, you plan to use your program defensively. Or instead, you may consider a hybrid strategy – defensive most of the time, but opportunistic as deals surface. Having a clear strategy at the onset helps determine how to resource for the program and sets you and your bank up for long-term success.

How will you build and staff the program?

Next, you will need to determine how you will resource your swap program. At the leadership level, how much direct control do you want over the process? Will the swap program report up through the commercial business line or through the CFO/Treasurer? Based on your workload and resources, does it make sense to leverage the experience and talent of an advisor? Can you hire a program owner from within, or will you need to seek talent from the outside? Can the program owner assume additional responsibilities outside of the swap program? Do they already have existing responsibilities?

How will the program be structured for success given the intersection between Lending, Credit, Treasury and Loan Servicing?

What are the common roles associated with a swap program?

Front Office Roles

Derivatives Marketer

The derivatives marketer directly supports the bank’s lenders and relationship managers. They are involved in educating customers and marketing transactions. Often considered the program point person (or program owner), the derivative marketer is the in-house swap specialist and is familiar with the swap process from start-to-finish.

Trading Desk/Trader

Larger financial institutions may have an internal “trading desk,” providing “live levels” to borrowers for swap executions and then going to the dealer side to execute offsetting trades. While the marketer’s primary role is to help educate customers and structure hedges that meet their needs, the trading desk/trader’s primary responsibilities focus on capital markets related activities like executing and closing out deals.

Middle Office Roles

Risk Monitoring and Controls

Because swaps are customized for each transaction, a critical function is risk monitoring and controls. This person is responsible for checking the executed deal and ensuring it is documented correctly prior to locking it down in the swap system of record. The checker reviews and confirms the accuracy of the trading desk’s work, providing assurance to the bank that deals are done right with no outstanding discrepancies. A key step in complaince monitoring is to ensure that all required trade details are reported to the bank’s chosen swap data repository at inception, for trade lifecycle events, and quarterly valuations.

Documentation Specialist

The documentation specialist is responsible for all swap documentation, including the ISDA Master and Schedule, eligible contract participant (ECP) verification forms, end user exception (EUE) forms and submission, borrower trade confirmations and other swap documentation. The documentation specialist typically issues, manages and warehouses all swap documentation for the bank.

Legal and Regulatory Compliance Resource

This is the go-to person (or firm) for borrower ISDA documentation negotiation, loan-swap terms reconciliation and review, and Dodd-Frank ECP questions.

Back Office Roles


This group(s) administer borrower valuation reports, borrower payment notices, collateral management for OTC trades, margin and payments for cleared trades, and counterparty payments.

Treasury and Accounting

The Treasury team often handles dealer payments, collateral management and portfolio risk reporting. The Accounting team is responsible for ensuring proper accounting for all derivative activity. This includes journal entries, SEC disclosures (if publicly traded) and regulatory call reporting associated with running a back-to-back program.

How do you build long-term success with your swap program?

Banks of all sizes, organizational structures and markets use swap programs to compete for long-term, fixed-rate loans. Some programs can be in danger of fizzling-out if they fail to follow a roadmap to success.

A bank should begin by testing the waters with lenders and customers. First and foremost, is there a need for long-term, fixed-rate financing? Without demand from either your existing customers or from the market in general, starting a successful program will be challenging. To a lesser degree, it is important to know that your lenders and your customers are familiar with interest rate swaps and open to offering them to borrowers. In your market, are borrowers sophisticated enough to accept an interest rate swap? A decade ago, the default answer for many community and smaller regional banks would have been “no”. Today, many commercial customers are familiar with or have exposure to swaps as a possible match to meet their financing needs.

Once you know that a swap program is right for your bank, it is time to get your resources together. Typically, banks are not able to handle all aspects of the program in-house and instead turn to outside advisors for assistance. An independent advisor with long-term proven experience in helping banks start successful swap programs can make the difference between success and a failure to launch.

Next, set ambitious, yet attainable goals. Common goals include revenue targets and number of deals per year. As circumstances change, you can shift your target, but try not to lose focus on your strategy and what you have set forth to achieve.

Launch the program with key lenders who will set a positive example. Remember back in step one when we determined if lenders would be open to offering swaps? Find the lenders who are on board and let them champion the program at its onset. Set them up for success with training and appropriate incentives.

Next, focus on bringing the first deal home. Once you have locked-in a mutually beneficial deal with a borrower, analyze the circumstances that brought the deal together, and look for similar opportunities in your market. Celebrate the win by sharing the story with your lenders and encourage them to look for similar deals in their territories.

Once you have found some success, the next steps are to grow, optimize and scale the program. Look for inefficiencies in the mechanics of your first swap, and work to optimize the process. Determine what it would take to grow this business, and what the impact could be on the bank.

Lastly, develop a growth strategy and understand how to step-up your sophistication. If you are a small bank, you may consider outsourcing most aspects of your interest rate swap program but you will want to have a roadmap of the milestones ahead that will prompt you to take certain components in-house, such as marketing, trading, accounting, etc.


When properly thought through, set-up and executed, a borrower swap program can be a great way for banks to compete for long-term, fixed-rate deals. Setting aggressive, yet attainable goals, resourcing properly, and following the proper steps for long-term success can help you make a positive impact on your bank and your borrowers.

Since 2001, Chatham Financial has partnered with banks of all sizes to help launch, run, and grow successful customer back-to-back swap programs. As a result, we are the largest and most experienced non-bank provider of back-to-back swap support to regional and community banks.

How can we help?

Send us a message to discuss how we can help launch or grow your interest rate derivatives program.

About the author

  • Ben Lewis

    Managing Director
    Head of Sales

    Financial Institutions | Denver, CO

    Ben Lewis is a Managing Director and Global Head of Sales for our Financial Institutions team. He leads business development efforts in the Western U.S. and works with depositories helping them manage interest rate risk.


Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit

Transactions in over-the-counter derivatives (or “swaps”) have significant risks, including, but not limited to, substantial risk of loss. You should consult your own business, legal, tax and accounting advisers with respect to proposed swap transaction and you should refrain from entering into any swap transaction unless you have fully understood the terms and risks of the transaction, including the extent of your potential risk of loss. This material has been prepared by a sales or trading employee or agent of Chatham Hedging Advisors and could be deemed a solicitation for entering into a derivatives transaction. This material is not a research report prepared by Chatham Hedging Advisors. If you are not an experienced user of the derivatives markets, capable of making independent trading decisions, then you should not rely solely on this communication in making trading decisions. All rights reserved.