Credit Support Document - ISDA Provision

ISDA Anatomy™ incorporating our exclusive ISDA in a Nutshell™ Go Premium In a Nutshell™ Section Credit Support Document : “Credit Support Document” means anything described as such in the Schedule. view template 2002 ISDA full text of Section Credit Support Document : “Credit Support Document” means any agreement or instrument that is specified as such in this Agreement. view template Click here for the text of Section Credit Support Document in the 1992 ISDA Index: Click ᐅ to expand: ISDA Navigation The Varieties of ISDA Experience Subject 2002 (wikitext) 1992 (wikitext) 1987 (wikitext) Preamble Pre Pre Pre Interpretation 1 1 1 Obligns/Payment 2 2 2 Representations 3 3 3 Agreements 4 4 4 EODs & Term Events 5 Events of Default FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events Illegality • Tax Event • TEUM • CEUM • ATE • 5 Events of Default FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events Illegality • Tax Event • TEUM • CEUM • ATE • 5 Events of Default FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events Illegality • FM • Tax Event • TEUM • CEUM • ATE • Early Termination 6 Early Termination ET right on EOD • ET right on TE • Effect of Designation • Calculations 6 Early Termination ET right on EOD • ET right on TE • Effect of Designation • Calculations • Set-off 6 Early Termination ET right on EOD • ET right on TE • Effect of Designation • Calculations • Set-off Transfer 7 7 7 Contractual Currency 8 8 8 Miscellaneous 9 9 9 Offices; Multibranch Parties 10 10 10 Expenses 11 11 11 Notices 12 12 12 Governing Law 13 13 13 Definitions 14 14 14 Schedule Schedule Schedule Schedule Termination Provisions Part 1 Part 1 Part 1 Tax Representations Part 2 Part 2 Part 2 Documents for Delivery Part 3 Part 3 Part 3 Miscellaneous Part 4 Part 4 Part 4 Other Provisions Part 5 Part 5 Part 5 Comments? Questions? Suggestions? Requests? Insults? We’d love to 📧 hear from you. Sign up for our newsletter.

Being the document by which Credit Support is provided by a Credit Support Provider.

The 1995 CSA is not a Credit Support Document...

Note that a CSA is not a Credit Support Document, and you should not list it as one in Part 4 of the Schedule, however satisfying it might be to do so. I mean it sounds like one, right? But no: the counterparty cannot be its own Credit Support Provider. The 1995 CSA is, rather, a Transaction under the ISDA Master Agreement. This is rather important to the whole issue of close-out netting. Deep ISDA lore.

... But the 1994 New York law CSA is a Credit Support Document

Because it is a security financial collateral arrangement arrangement and not a title transfer collateral arrangement, transfer of credit support under a 1994 New York law CSA does not change the net liabilities between the parties, the 1994 New York law CSA (and its regulatory VM successor, the 2016 NY Law VM CSA is a Credit Support Document and not a transaction under the ISDA Master Agreement. Fun, huh?

Guarantees and the ISDA Master Agreement: why Transaction-specific guarantees don’t work

Should a client request a {{{{{1}}}|transaction}}-specific parental {{{{{1}}}|guarantee}} (or letter of credit) for a {{{{{1}}}|Transaction}} under an ISDA Master Agreement instead of the usual “all obligations” guarantee of all the counterparty’s obligations under the ISDA Master Agreement, hit the alarm button.

You should never agree to the {{{{{1}}}|guarantee}} of individual {{{{{1}}}|Transaction}}s (nor accept a letter of credit with respect to individual {{{{{1}}}|Transactions}}) under an ISDA Master Agreement. If you do, because of the way ISDA Master Agreements are closed out under Section {{{{{1}}}|6(e)}} — or rather, aren’t closed out, you might find that just when you want your guarantee to pay, the {{{{{1}}}|Transaction}} it is guaranteeing isn’t there anymore:

On a close-out, each {{{{{1}}}|Transaction}} is terminated, the individual close-out amounts are determined, they’re aggregated up to a single net sum (i.e. negative exposures are netted off against positive ones) and a single {{{{{1}}}|Close Out Amount}} is payable with respect to all terminated {{{{{1}}}|Transactions}} under {{{{{1}}}|6(e)}} ({{{{{1}}}|Payments on Early Termination}}) of the ISDA Master Agreement.

That is to say, payments following termination of a {{{{{1}}}|Transaction}} are not payable under the {{{{{1}}}|Transaction}} at all - they are payable under the ISDA Master Agreement itself. Therefore, if the guarantee relates to the single {{{{{1}}}|Transaction}}, at the point you wish to rely on it (i.e., upon the party’s default), it will have gone, with no payment required. Vanished, like tears in the rain.