Marking to Market of Collateral during the currency of a Loan on a Loan by Loan basis - GMSLA Provision: Difference between revisions
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{{fullanat|gmsla|5.5|2010}} | |||
It will be a rum {{tag|GMSLA}} indeed in which this provision applies. It will generally fall upon deaf ears, by dint of paragraph {{gmslaprov|5.4}} ({{gmslaprov|aggregate margining}}), which will apply instead unless you specifically override it, and it is hard to conceive of situations in which you would do that. | It will be a rum {{tag|GMSLA}} indeed in which this provision applies. It will generally fall upon deaf ears, by dint of paragraph {{gmslaprov|5.4}} ({{gmslaprov|aggregate margining}}), which will apply instead unless you specifically override it, and it is hard to conceive of situations in which you would do that. | ||
Anyway, since you asked, it goes like this: | Anyway, since you asked, it goes like this: | ||
{{nuts|GMSLA|5.5}} | {{nuts|GMSLA|5.5}} | ||
====Commentary==== | ====Commentary==== | ||
See also {{gmslaprov|5.4}}, Collateralisation on aggregate, which will generally (for which read “inevitably”) be the preferred alternative for most financial institutions. | See also {{gmslaprov|5.4}}, Collateralisation on aggregate, which will generally (for which read “inevitably”) be the preferred alternative for most financial institutions. | ||
Revision as of 16:16, 5 October 2017
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GMSLA Anatomy™
If paragraph Schedule 1.3 of the Schedule indicates this paragraph 5.5 shall apply in lieu of paragraph 5.4, the Posted Collateral in respect of any Loan shall bear from day to day and at any time the same proportion to the Market Value of Securities equivalent to the Loaned Securities as the Posted Collateral bore at the commencement of such Loan. Accordingly:
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It will be a rum GMSLA indeed in which this provision applies. It will generally fall upon deaf ears, by dint of paragraph 5.4 (aggregate margining), which will apply instead unless you specifically override it, and it is hard to conceive of situations in which you would do that.
Anyway, since you asked, it goes like this:
5.5 in a Nutshell™ (GMSLA edition)
5.5 Required Collateral Value (Single Loans): Where 5.5 applies, the Posted Collateral on any Loan must bear the same proportion to the Market Value of the Loaned Securities as it bore at the beginning of the Loan. Therefore:
- (a) Required Collateral Value: the Market Value of the Posted Collateral (including income etc.) must always equal the Required Collateral Value;
- (b) Returns: whenever the Market Value of the Posted Collateral for any Loan exceeds the Required Collateral Value Lender must return enough Equivalent Collateral to Borrower to eliminate the excess; and
- (c) Further deliveries: whenever the Market Value of the Posted Collateral falls below the Required Collateral Value Borrower must provide further Collateral to Lender on demand to eliminate the deficiency.
Commentary
See also 5.4, Collateralisation on aggregate, which will generally (for which read “inevitably”) be the preferred alternative for most financial institutions.