Default Rate - 1992 ISDA Provision

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1992 ISDA Master Agreement
A Jolly Contrarian owner’s manual™

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1(a) (b) (c) | 2(a) (b) (c) (d) (e) | 3(a) (b) (c) (d) (e) (f) | 4(a) (b) (c) (d) (e) | 55(a) Events of Default: 5(a)(i) Failure to Pay or Deliver 5(a)(ii) Breach of Agreement 5(a)(iii) Credit Support Default 5(a)(iv) Misrepresentation 5(a)(v) Default Under Specified Transaction 5(a)(vi) Cross Default 5(a)(vii) Bankruptcy 5(a)(viii) Merger Without Assumption 5(b) Termination Events: 5(b)(i) Illegality 5(b)(ii) Tax Event 5(b)(iii) Tax Event Upon Merger 5(b)(iv) Credit Event Upon Merger 5(b)(v) Additional Termination Event (c) | 6(a) (b) (c) (d) (e) | 7 | 8(a) (b) (c) (d) | 9(a) (b) (c) (d) (e) (f) (g) | 10 | 11 | 12(a) (b) | 13(a) (b) (c) (d) | 14 |

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Section Default Rate in a Nutshell

Use at your own risk, campers!
Default Rate” means the payee’s self-certified cost of funding plus 1% per annum.

Full text of Section Default Rate

Default Rate” means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the relevant payee (as certified by it) if it were to fund or of funding the relevant amount plus 1% per annum.

Related agreements and comparisons

Related Agreements
Click here for the text of Section Default Rate in the 2002 ISDA
Comparisons
There is no comparison. The clauses are the same.

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Content and comparisons

No change between the 1992 ISDA and the 2002 ISDA.

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Summary

Default interest is one of those perennial things in finance and is generally a rate higher than the implied funding rate for the period and person in question. You might well ask — though one might, as the JC does, struggle heroically to not go there — whether an arbitrary loading on what ought to be a fair estimate of one’s actual carrying cost is not an unenforceable penalty, but hey, everyone does it.

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See also

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References