Template:Failure to pay under GMSLA: Difference between revisions
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Noting the exception for ''re''delivery of {{gmslaprov|Equivalent}} {{gmslaprov|Securities}} or {{gmslaprov|Collateral}}<ref>See {{gmslaprov|9.1(b)}} and {{gmslaprov|9.2(b)}}.</ref> | Noting the exception for ''re''delivery of {{gmslaprov|Equivalent}} {{gmslaprov|Securities}} or {{gmslaprov|Collateral}},<ref>See {{gmslaprov|9.1(b)}} and {{gmslaprov|9.2(b)}}.</ref> the failure to pay or deliver {{gmslaprov|Events of Default}} under the {{gmsla}} are: | ||
*'''Cash {{gmslaprov|Collateral}} failures''': ''Any'' failure to pay or repay [[cash]] {{gmslaprov|Collateral}} when required — the theory being that you can’t blame an upstream counterparty for your failure to deliver [[cash]]<ref>For a jauntily [[Metaphysics|metaphysical]] examination of the nature of hard cold folding green stuff — why it is, by nature, profoundly different to any other [[financial instrument]], see our article on [[cash]].</ref>; | *'''Cash {{gmslaprov|Collateral}} failures''': ''Any'' failure to pay or repay [[cash]] {{gmslaprov|Collateral}} when required — the theory being that you can’t blame an upstream counterparty for your failure to deliver [[cash]]<ref>For a jauntily [[Metaphysics|metaphysical]] examination of the nature of hard cold folding green stuff — why it is, by nature, profoundly different to any other [[financial instrument]], see our article on [[cash]].</ref>; | ||
*'''Non-cash {{gmslaprov|Collateral}} delivery failures''': Any failure to ''deliver'' non-cash {{gmslaprov|Collateral}} (either at inception of by way of further {{gmslaprov|Collateral}}). Here the {{gmslaprov|Borrower}} has discretion<ref>From those assets that meet the eligibility criteria in the Schedule; moral of story: don’t allow yourself to be too tightly constrained on eligibility criteria.</ref> on what {{gmslaprov|Collateral}} it delivers, so again doesn't have the excuse that it has suffered an upstream failure. Where it is a {{gmslaprov|Collateral}} return, the Lender has less discretion, so is more prone to upstream settlement failures. Note that non-delivery of {{gmslaprov|Securities}} at the commencement of a {{gmslaprov|Loan}} is not a failure to pay, also for “potential upstream failure” reasons: it just means the {{gmslaprov|Loan}} doesn’t happen. | *'''Non-cash {{gmslaprov|Collateral}} delivery failures''': Any failure to ''deliver'' non-cash {{gmslaprov|Collateral}} (either at inception of by way of further {{gmslaprov|Collateral}}). Here the {{gmslaprov|Borrower}} has discretion<ref>From those assets that meet the eligibility criteria in the Schedule; moral of story: don’t allow yourself to be too tightly constrained on eligibility criteria.</ref> on what {{gmslaprov|Collateral}} it delivers, so again doesn't have the excuse that it has suffered an upstream failure. Where it is a {{gmslaprov|Collateral}} return, the Lender has less discretion, so is more prone to upstream settlement failures. Note that non-delivery of {{gmslaprov|Securities}} at the commencement of a {{gmslaprov|Loan}} is not a failure to pay, also for “potential upstream failure” reasons: it just means the {{gmslaprov|Loan}} doesn’t happen. | ||
*Any [[failure to pay]] ''following exercise of a [[mini closeout]]'' under Paragraph {{gmslaprov|9}}. That is, not a failure to | *'''[[Mini closeout]] failures''': Any [[failure to pay]] ''following exercise of a [[mini closeout]]'' under Paragraph {{gmslaprov|9}}. That is, not a failure to redeliver {{gmslaprov|Equivalent}} {{gmslaprov|Collateral}} or {{gmslaprov|Securities}} themselves, but a failure to settle any [[mini close-out]] or [[buy-in]] ''following'' the [[mini closeout]]. <br> | ||
Latest revision as of 17:43, 7 January 2022
Noting the exception for redelivery of Equivalent Securities or Collateral,[1] the failure to pay or deliver Events of Default under the 2010 GMSLA are:
- Cash Collateral failures: Any failure to pay or repay cash Collateral when required — the theory being that you can’t blame an upstream counterparty for your failure to deliver cash[2];
- Non-cash Collateral delivery failures: Any failure to deliver non-cash Collateral (either at inception of by way of further Collateral). Here the Borrower has discretion[3] on what Collateral it delivers, so again doesn't have the excuse that it has suffered an upstream failure. Where it is a Collateral return, the Lender has less discretion, so is more prone to upstream settlement failures. Note that non-delivery of Securities at the commencement of a Loan is not a failure to pay, also for “potential upstream failure” reasons: it just means the Loan doesn’t happen.
- Mini closeout failures: Any failure to pay following exercise of a mini closeout under Paragraph 9. That is, not a failure to redeliver Equivalent Collateral or Securities themselves, but a failure to settle any mini close-out or buy-in following the mini closeout.
- ↑ See 9.1(b) and 9.2(b).
- ↑ For a jauntily metaphysical examination of the nature of hard cold folding green stuff — why it is, by nature, profoundly different to any other financial instrument, see our article on cash.
- ↑ From those assets that meet the eligibility criteria in the Schedule; moral of story: don’t allow yourself to be too tightly constrained on eligibility criteria.