Credit Support Provider - ISDA Provision
Overview
The concept dates from the 1992 ISDA — while Credit Support Document got a run out in the 1987 ISDA, Credit Support Document did not — but, we think, the terminology creates far more confusion than it needed to, and maybe the ancient ninja squad of the Eighties was on to something.
Summary
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.
Given that a 1995 CSA is not a Credit Support Document at all, but a Transaction under the ISDA Master Agreement, a party to it is obviously not a Credit Support Provider.
A 1994 NY 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 NY CSA, be described as a “Credit Support Provider"?
No, sayeth the User’s Guide to the 1994 NY CSA:
“Parties to an ISDA Master Agreement should not, however, be identified as Credit Support Providers with respect to the Annex, as such term is intended only to apply to third parties.”
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”?
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- JC’s “nutshell” summary of the clause
- Background reading and long-form essays
- 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.