Template:Csa Custodian Provision summ

A key difference between the security interest CSA and the title transfer CSA is that where you are pretending to hold subject to some security, the {{{{{1}}}|Pledgor}} might be inclined to want to deliver the credit support to a {{{{{1}}}|Custodian}} or escrow agent of some kind on the {{{{{1}}}|Secured Party}}’s behalf, rather than delivering outright to the {{{{{1}}}|Secured Party}} who might, you know, lose the collateral or something.

A party to a title transfer CSA does not have this anxiousness, seeing as the {{{{{1}}}|Transferee}} gets transferred the {{{{{1}}}|Credit Support}} outright and is allowed to lose it, as long as it delivers back something similar.

As long as we are talking OG CSAs or VM CSAs, this is all rather moot: in practice, the {{{{{1}}}|Transferee}}/{{{{{1}}}|Secured Party}} will have a right to rehypothecate any {{{{{1}}}|Posted Credit Support}}, whereupon the {{{{{1}}}|Secured Party}} becomes, effectively a debtor for that Credit Support return obligation, and not a {{{{{1}}}|Secured Party}} at all. That is, exactly like a {{{{{1}}}|Transferee}} under a title transfer CSA.

That being the case, the {{{{{1}}}|Custodian}} provision is almost always a dead letter. Quietly, I find myself wondering why I am even bothering to write all this. Even more so since the VM CSA has, for the largest part, transmogrified itself into an all-cash arrangement: you can’t custody cash: it immediately creates a debt obligation. This is deep financial lore.

If we are talking 2018 Regulatory IM CSA, on the other hand, it is a different story: {{{{{1}}}|Eligible Credit Support}} under that regime is inevitably non-cash, there is generally no right of rehypothecation, and any such {{{{{1}}}|Posted Credit Support}} would be held by a third-party custodian or escrow agent. However, if you were doing that you would be under the Template:Imcsa form. So the {{{{{1}}}|Custodian}} provision remains all but a dead letter in the security interest CSAs.