Equivalent Credit Support - CSA Provision

ISDA 1995 English Law Credit Support Annex Go Premium In a Nutshell™ Section Equivalent Credit Support: "Equivalent Credit Support” means, for any Eligible Credit Support in the Credit Support Balance, fungible assets having the same nominal value. view template 1995 CSA full text of Section Equivalent Credit Support: “Equivalent Credit Support” means, in relation to any Eligible Credit Support comprised in the Credit Support Balance, Eligible Credit Support of the same type, nominal value, description and amount as that Eligible Credit Support. view template Related Agreements Click here for the text of Section Equivalent Credit Support in the 1995 English Law CSA Click here for the text of Section Equivalent Credit Support in the 2016 English Law VM CSA Click [[{{{3}}} - NY VM CSA Provision|here]] for the text of the equivalent, Section [[{{{3}}} - NY VM CSA Provision|{{{3}}}]] in the 2016 NY Law VM CSA Comparisons Template:Csadiff Equivalent Credit Support {{nycsadiff {{{3}}}}} Resources Full wikitext | Nutshell wikitext Navigation 1 (Interpretation) | 2 (Credit Support Obligations) | 3 (Transfers, Calculations and Exchanges) | 4 (Dispute Resolution) | 5 (Title Transfer etc) | 6 (Default) | 7 (Representation) | 8 (Expenses) | 9 (Miscellaneous) | 10 (Definitions) | 11 (Elections and Variables) Index: Click ᐅ to expand: 1995 CSA Comments? Questions? Suggestions? Requests? Insults? We’d love to 📧 hear from you. Sign up for our newsletter.

Trick for young players: “Equivalent Credit Support” is meant only to capture assets which are fungible with assets forming part of posted Credit Support Balance (exactly the same ISIN) – the point of “equivalence” is to buttress the 1995 CSA’s title transfer analysis by allowing return of a security which isn’t the exact security that was delivered in the first place, but another one from the same issue.

If you had to redeliver the same one, the “transfer of title” is in danger of being recharacterised into a pledge/loan, which has a bunch of unwanted knock-on effects.

You may come across a couple of instances (in OTC Clearing/CCP space) where the CSA definition of “Equivalent Credit Support” has been modified to capture not just fungible securities of the same Series/ISIN, but “similar ones” – same issuer but different maturity, and under a different ISIN etc. This is likely to have arisen by way of misapprehension fromthat “Equivalent Credit Support” is already intended to allow redelivery of non-fungible securities of a similar type, and the modification is only clarificatory. The broker’s funding desk may say, “yeah but what if there’s some illiquidity in the market?” but — well, friend, you have that exact risk across your entire ISDA book, so you’re already long that risk. In practice, if there is a market disruption and you can’t get hold of the necessary collateral, as long as it isn’t coterminous with your own credit deterioration, you should be able to hash it out.

And if you are worried about it, go for a cash-only CSA, or just don’t reuse that asset.

Once so explained the funding team generally settles down.

Now there may be a need for the “similar securities” concept in the OTC to CCP space, doubtful, but let’s say — but we should call it something else – perhaps “Similar Credit Support” – to differentiate it from “Equivalent Credit Support” which is still needed in the CSA to support the title transfer analysis.