Credit Support Provider
2002 ISDA Master Agreement
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The concept dates from the 1992 ISDA, but, we think, the terminology creates far more confusion than it really needed to.
A Credit Support Provider is basically a guarantor: a third party who stands being the obligations of a counterparty to the ISDA Master Agreement. Usually this is someone providing an all obligations guarantee or a standby letter of credit, but on rare occasions — very rare, usually involving espievies — might be a third party directly posting credit support to the other party under a Credit Support Document. In any case it is not a direct counterparty to the ISDA Master Agreement itself, whether or not the CSA counts as a Credit Support Document.
A 1994 New York law CSA, on the other hand, is a Credit Support Document though. So should a Party to the ISDA Master Agreement, where there is a 1994 New York law CSA, be described as a “Credit Support Provider"?
No, sayeth the User’s Guide to the 1994 ISDA CSA (NY law):
the Users’ Guide to the 2002 ISDA is similarly emphatically vague:
“The meaning of “Credit Support Provider” ... should apply to any person or entity (other than either party) providing, or a party to, a Credit Support Document delivered on behalf of a particular party.”
This means that a New York Law CSA — which is not a Transaction under the ISDA architecture, remember, is a Credit Support Document, but the person providing Credit Support under it — is not a “Credit Support Provider”?
- The JC’s famous Nutshell™ summary of this clause
- A brief think-piece on whether it really was a good idea to use the same descriptor — “Credit Support” — to describe three things (a guarantor, a collateral framework, and the cash and assets posted under it) which are economically related, but ontologically quite different.