When must a bank share its interest rate view on an interest rate derivative?
Deutsche Bank, hospitality entrepreneurs and an interest rate swap concluded at the wrong moment
Two hospitality entrepreneurs, directors and shareholders of BOMO III B.V., had banked with Deutsche Bank for years. To hedge the interest rate risk on their financing portfolio, they concluded two interest rate swaps in November 2005. In January 2008 they terminated both swaps early, on Deutsche Bank's advice, as they submitted, and received for this a positive market value of more than €900,000 in total.
A few months later, in June 2008, Deutsche Bank again advised them to conclude interest rate swaps. On 27 June 2008 the entrepreneurs signed for Interest Rate Swap 2 and Interest Rate Swap 2a, both with a term of ten years and fixed rates of 4.92% and 4.89% respectively. What they did not know: on 2 June 2008 Deutsche Bank's Economic Bureau had internally drawn up an interest rate view that in fact predicted a fall in rates, from 4.7% in the first quarter of 2008 to 3.8% in the fourth quarter of 2009. That view was never shared with the entrepreneurs.
In January 2020 the entrepreneurs annulled Interest Rate Swap 2 out of court on the ground of mistake (Section 6:228 DCC) and held Deutsche Bank liable for the loss suffered. The Amsterdam District Court and subsequently the Amsterdam Court of Appeal dismissed the claims. The Supreme Court takes a different view.
Duty to disclose an interest rate view depends on the circumstances, duty of care is an independent standard
In this judgment the Supreme Court formulates two substantive key rules that are of importance for the practice of commercial litigation involving financial products.
The first key rule concerns the duty to disclose in the context of mistake. The court of appeal had held that a bank is not by definition obliged to share its interest rate view with a counterparty who concludes an interest rate derivative to hedge interest rate risk. That starting point is in itself correct, according to the Supreme Court (para. 3.2.3). The duty of a financial institution to disclose its own interest rate view is not an absolute obligation. It does not mean that a financial institution must, without more, disclose its internal expectations regarding interest rate developments. At the same time, the Supreme Court expressly leaves open that special circumstances may indeed entail that the bank must share its interest rate view. It may be relevant that the bank gave the advice to terminate the existing interest rate swaps only to advise, a mere few months later, the conclusion of new swaps, while its internal expectation deviated from the message conveyed to the client. The court of appeal had not demonstrably taken that specific connection into account, which rendered its judgment incomprehensible (para. 3.2.4).
The second key rule concerns the banking duty of care. For the duty-of-care claim, the court of appeal had confined itself to a reference to its ruling on the duty to disclose in the context of mistake. That was an error of law (para. 3.3.3). The banking duty of care, which flows from the social function and expertise of professional providers of high-risk financial products, is an independent standard. Its purpose is to protect the counterparty against its own rashness or lack of insight. Its scope depends on the counterparty's expertise, the complexity of the product and the associated risks. A ruling on the duty to disclose in the context of mistake does not automatically say anything about compliance with that duty of care, these are distinct legal questions, each requiring an independent assessment. Moreover, the court of appeal had failed to address the submission that, before Interest Rate Swap 2 was entered into, Deutsche Bank had stated that interest rates would rise (para. 3.3.2), a submission that had been raised in the context of both mistake and the duty of care.
The entrepreneurs' offer of evidence, including that Deutsche Bank had said that rates would rise and that they would not have concluded the swap without that advice, had also been wrongly disregarded (para. 3.4.2). The case is referred to the Hague Court of Appeal.
What does this mean for entrepreneurs with an interest rate derivative?
The judgment confirms that an interest rate derivative case involves two legally distinct routes: the mistake route (Section 6:228 DCC) and the duty-of-care route. Both routes deserve an independent analysis, conflating them is legally incorrect and may lead to cassation being granted.
As regards the duty to disclose, a bank does not as standard have to share its interest rate view. But where the bank itself played a role in the decision to terminate an earlier swap, subsequently gives new advice to conclude a new swap, and its internal interest rate view deviates from the message to the client, that combination of facts may indeed give rise to a duty to disclose. What matters, in every case, is whether the counterparty acted under the influence of an incorrect impression of the facts, while the bank knew or ought to have known that correct information would have influenced the decision.
As regards the duty of care, the central question is whether the bank, as a professional provider, sufficiently protected the counterparty against its own rashness or lack of insight. That question is not answered by ruling that no duty to disclose existed. Anyone who concluded an interest rate derivative on the basis of advice that may not have been consistent with the bank's internal interest rate view would do well to examine both grounds, and to have it assessed whether the offer of evidence was correctly weighed.
Frequently asked questions
Can an interest rate swap be annulled on the ground of mistake if the bank did not share its interest rate view?
That depends on the circumstances. A bank is not as standard obliged to share its internal interest rate view. But if the bank itself advised terminating an earlier swap and subsequently recommended a new swap that deviated from its own interest rate expectation, special circumstances may give rise to a duty to disclose. Annulment on the ground of mistake (Section 6:228 DCC) requires evidence that the incorrect or incomplete statement was decisive for the conclusion of the agreement.
What is the difference between the duty to disclose in the context of mistake and the banking duty of care?
The duty to disclose in the context of mistake relates to information needed to prevent an incorrect impression of the facts. The banking duty of care is a broader standard: it requires professional providers of high-risk financial products to protect the counterparty against its own rashness or lack of insight. The Supreme Court makes clear that both standards must be assessed independently, a ruling on the one is not an answer to the other.
Is a claim against Deutsche Bank in respect of an interest rate derivative still possible if the swap has already expired?
Possibly so. Interest Rate Swap 2 in this case had already expired on 1 July 2018, but the entrepreneurs annulled the agreement out of court on the ground of mistake only in January 2020. The limitation periods depend on the moment at which the person concerned became aware, or could reasonably have become aware, of the loss and of the person liable. Legal advice is warranted in order to assess whether the limitation period has not yet expired.
Judgment: ECLI:NL:HR:2026:793, Supreme Court, 22 May 2026. On appeal in cassation from: ECLI:NL:GHAMS:2025:103.
Cited case law
Supreme Court: ECLI:NL:HR:2026:793
Courts of Appeal: ECLI:NL:GHAMS:2025:103
See also
- Compound interest on a loan: without an express stipulation, simple interest applies
- Banking duty of care
- When may a bank terminate a credit facility?: on the banking duty of care when terminating credit facilities of private individuals.
- Commercial litigation at Prime Law: handling contractual and financial disputes.
- Corporate litigation at Prime Law: shareholder disputes and directors' liability.