5.5 - GMSLA Provision: Difference between revisions
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====Commentary==== | ====Commentary==== | ||
See also {{gmslaprov|5.4}}, Collateralisation on aggregate, which will generally be the preferred alternative for most financial institutions. | See also {{gmslaprov|5.4}}, Collateralisation on aggregate, which will generally be the preferred alternative for most financial institutions. | ||
Revision as of 10:04, 30 July 2015
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 be the preferred alternative for most financial institutions.
Summary
In an Nutshell™:
Where 5.5 applies, the Posted Collateral in respect of any Loan bears the same proportion to the Market Value of the Loaned Securities as the Posted Collateral bore at the commencement of the Loan. Accordingly:
- (a) the Market Value of the Posted Collateral must always equal the Required Collateral Value;
- (b) whenever the Market Value of the Posted Collateral for any Loan (including unpaid amounts and unpaid Income on Non-Cash Collateral) exceeds the Required Collateral Value under the Loan (including all amounts due by the Borrower and
- (ii) any Income payable in respect of Equivalent Securities,
- (ii) any Income payable in respect of Equivalent Securities,
- Lender shall repay to Borrower such Equivalent Collateral to eliminate the excess; and
- (c) whenever the Market Value of the Posted Collateral together with:
- (i) all amounts due by the Lender under the Loan; and
- (ii) any Income payable on Non-Cash Collateral
- (i) all amounts due by the Lender under the Loan; and
- falls below the Required Collateral Value together with:
- (i) all amounts due by the Borrower under the Loan; and
- (ii) any Income payable under the Equivalent Securities, Borrower shall (on demand) provide further Collateral to Lender to eliminate the deficiency.
- (i) all amounts due by the Borrower under the Loan; and
See Also
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