Failure to pay: Difference between revisions
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{{g}}{{a|negotiation|}} | {{g}}{{a|negotiation|}}[[Failure to pay]] is the classic [[event of default]] in a financial {{t|contract}}. There is no more profound indication that you may be unable to honour your obligations to pay a sum of money that the fact you have actually not done so. Almost all close-outs will derive from some kind of failure to pay or insolvency — but don’t let that knowledge stop your credit department insisting on a four month negotiation about [[ratings downgrade|ratings downgrade trigger]]s. | ||
Contrast with a [[failure to deliver]] which in some | Contrast with a [[failure to deliver]] which in ''some'' {{t|contract}}s<ref>eg, and {{isdama}}.</ref> is tantamount in outrage to a [[failure to pay]], but in ''others'' is just one of those things that we accept, sort out, and move on with. For example, [[stock lending]] transactions, where a failure to ''lend'' {{gmslaprov|Securities}}, or ''return'' {{gmslaprov|Securities}} or {{gmslaprov|Collateral}}, might be just one of those things: the result of ordinary market fluctuations, where settlement failures are common, and one often relies on someone else — or a chain of someone elses — settling the necessary {{gmslaprov|Securities}} into you so you can settle them to your loan counterparty. | ||
{{sa}} | {{sa}} | ||
Revision as of 12:06, 27 June 2019
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Negotiation Anatomy™
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Failure to pay is the classic event of default in a financial contract. There is no more profound indication that you may be unable to honour your obligations to pay a sum of money that the fact you have actually not done so. Almost all close-outs will derive from some kind of failure to pay or insolvency — but don’t let that knowledge stop your credit department insisting on a four month negotiation about ratings downgrade triggers.
Contrast with a failure to deliver which in some contracts[1] is tantamount in outrage to a failure to pay, but in others is just one of those things that we accept, sort out, and move on with. For example, stock lending transactions, where a failure to lend Securities, or return Securities or Collateral, might be just one of those things: the result of ordinary market fluctuations, where settlement failures are common, and one often relies on someone else — or a chain of someone elses — settling the necessary Securities into you so you can settle them to your loan counterparty.
See also
- credit mitigation
- Failure to pay - ISDA provision
- event of default
- Failure to pay under the 2010 GMSLA, mini close-out and all that good stuff.
- ↑ eg, and ISDA Master Agreement.