Are cross-currency swaps the same as FX swaps?

Despite the confusing similarity in their names, cross-currency swaps and FX swaps are very different products.

What is FX swap & how does it work?

(It’s free). An FX swap is another kind of agreement between two banks, exchanging one currency for another (so the EU-based Bank A lends EUR to the Bank B, while the U.S.-based Bank B lends U.S. dollars to the Bank A). In this case, the collateral for meeting its obligation is the amount to be repaid by one party to another.

What is a foreign currency swap?

Usually, though, a swap involves notional principal that's just used to calculate interest and isn't actually exchanged. A foreign currency swap is an agreement between two parties to swap interest rate payments on their respective loans in their different currencies. The agreement can also involve swapping principal amounts of loans.

What are the advantages of a currency swap?

This last point forms the basis of the advantages that a currency swap provides. Either company could conceivably borrow in its domestic currency and enter the foreign exchange market, but there is no guarantee that it won't end up paying too much in interest because of exchange rate fluctuations.