Other CSA - VM CSA Provision

2016 ISDA Credit Support Annex (VM) (English law) A Jolly Contrarian owner’s manual™ Resources and navigation Resources Full wikitext | Nutshell wikitext Navigation 1 (Interpretation) | 2 (Credit Support Obligations) | 3 (Transfers, Calculations and Exchanges) | 4 (Dispute Resolution) | 5 (Title Transfer etc) | 6 (Default) | 7 (Representation) | 8 (Expenses) | 9 (Miscellaneous) | 10 (Definitions) | 11 (Elections and Variables) Index: Click ᐅ to expand: 2016 VM CSA 2018 CSD 1995 CSA Paragraph Other CSA in a Nutshell™ Use at your own risk, campers! Template:Nutshell 2016 CSA Other CSA view template Full text of Paragraph Other CSA “Other CSA” means, unless otherwise specified in Paragraph 11, any other credit support annex or credit support deed that is in relation to, or that is a Credit Support Document in relation to, this Agreement. view template Tell me more Sign up for our newsletter — or just get in touch: for ½ a weekly 🍺 you get to consult JC. Ask about it here.

Content and comparisons

What to do about parallel credit support arrangements is clearly a bane of ISDA’s crack drafting squad™, and has occupied them in the many guises and iterations of credit support arrangements that they have devised over the years. See also Other CSA under the 2018 English law IM CSD, for example.

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Summary

See also Paragraph 1(b), which expounds itself thus:

1(b) Scope of this Annex and the Other CSA: The only Transactions which will be relevant for the purposes of determining “Exposure” under this Annex will be the Covered Transactions specified in Paragraph 11. Each Other CSA, if any, is hereby amended such that the Transactions that will be relevant for purposes of determining “Exposure” thereunder, if any, will exclude the Covered Transactions and the Transaction constituted by this Annex. Except as provided in Paragraph 9(h), nothing in this Annex will affect the rights and obligations, if any, of either party with respect to “independent amounts” or initial margin under each Other CSA, if any, with respect to Transactions that are Covered Transactions.

But what does it mean?

This “Other CSA” talk has in mind those who, in 2016, wished to “grandfather” Transactions which were already live when the regulatory margin obligations came into force, but which therefore preceded it and were out of scope for it.

Cue a monstrously painful dual-CSA regime where new transactions were margined under a new, regulatory margin-compliant 2016 VM CSA, and old ones were allowed to roll off on the clapped-out (but somehow better, right?) “other” 1995 CSA.

No doubt this made sound commercial sense in 2016. But a few years later, for all except those with 30-year inflation swaps on the books, all this “Other CSA” chat is just barnacle-encrusted confusion for everyone.

Note also, that a credit support annex is not, by any lights, a Credit Support Document — rather it is a Transaction in its own right under the ISDA Master Agreement — so this is unusually slap-dash work from ISDA’s crack drafting squad™.

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See also

• Paragraph 1(b) for the context.
• Other CSA in the 2018 English law IM CSD

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