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Cross default: Difference between revisions
→Specified Indebtedness
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===Specified Indebtedness=== | ===Specified Indebtedness=== | ||
Specified Indebtedness means, generally, any [[borrowed money|borrowings]] that, in aggregate, exceed a designated {{isdaprov|Threshold Amount}}. Because of the aggregation right, even comparatively trivial agreements can trigger the provision where they are relatively homogenous and affected by the same local circumstances (for example, retail | {{isdaprov|Specified Indebtedness}} means, generally, any [[borrowed money|borrowings]] that, in aggregate, exceed a designated {{isdaprov|Threshold Amount}}. Because of the aggregation right, even comparatively trivial agreements can trigger the provision where they are relatively homogenous and affected by the same local circumstances (for example, [[retail deposit]]s). A low {{isdaprov|Threshold Amount}}, therefore, presents three challenges: | ||
*It allows a more varied (and difficult to monitor) range of potential termination rights, because a greater number of agreements will qualify as Specified Indebtedness. | *It allows a more varied (and difficult to monitor) range of potential termination rights, because a greater number of agreements will qualify as {{isdaprov|Specified Indebtedness}}. | ||
*It “lowers the bar” so failures to comply with comparatively trivial financial commitments could be aggregated to trigger the Cross Default. | *It “lowers the bar” so failures to comply with comparatively trivial financial commitments could be aggregated to trigger the {{isdaprov|Cross Default}}. | ||
*By not excluding bank | *By not excluding [[bank deposit]]s, it raises the possibility of being triggered by localised events unrelated to a bank counterparty’s creditworthiness (for example, political action in a single jurisdiction which affects the bank's ability to pay on its local deposits) | ||
*Note that [[repo]] is not considered | *Note that [[repo]] is not considered {{isdaprov|Specified Indebtedness}}: see [[borrowed money]]. But don’t let your inner anal retentive amending the definition in your {{isdaprov|Schedule}} so that it is (even though [[repo]] is more properly dealt with by {{isdaprov|DUST}}). | ||
===Derivatives as Specified Indebtedness=== | ===Derivatives as Specified Indebtedness=== | ||