European Business Law Review

Volume 27 (2016)

Volume 27 (2016) / Issue 5

Giuseppe Settanni, 'Loans and Negative Interest Rates' (2016) 27 European Business Law Review, Issue 5, pp. 697–708

Abstract

Payments of interest amounts in floating rate loans are generally linked to specific reference parameters, such as EURIBOR. Given the decrease of such parameters to reference values around zero, what would happen if such a fall continued below this value (so that lenders have to pay interest amounts to borrowers)? General principles of interpretation of contracts, good faith and equity, jointly with an analysis of nature / characteristics of loan contracts could help to find a solution being the most transnational possible. In particular, reference could be made to: (i) an interpretation of the loan contract by which such contract cannot betray its nature (and interest payments are necessary in non-gratuitous loans); (ii) the equity principle, under which contracts have to be reasonable / fair (and lenders should receive back by borrowers at least the capital amount); (iii) the nature of loans as contracts necessarily requiring interest payments by borrowers.

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ISSN: 0959-6941
ID: EULR2016031