An interest rate swap or a cross currency swap that produces a very low profit rate, if any, for the originator who merely uses it to obtain business from “cross selling”. Also, it may be made on terms less favorable to the originator than those available at large on the market. Hara-Kiri is a Japanese word for the ritual suicide traditions practiced in Japan. Japanese banks and securities houses followed in the 1980s such a Hara-Kiri strategy in order to obtain an edge over competition especially in the underwriting business.
The strategy later proved to have been next to “financial suicide”.
