Instructions relating to the Required Collateral Value and responsibility for the Custodian - Pledge GMSLA Provision

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2018 Global Master Securities Lending Agreement (Pledge Version)
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GMSLA

Clause 5.4 in a Nutshell
Use at your own risk, campers!

5.4 Instructions relating to the Required Collateral Value and responsibility for the Custodian

5.4(a) By the Notification Time on each Business Day each Party will notify the other Party the Custodian of its determination of the Required Collateral Value.
5.4(b) Borrower will be liable for Custodian’s performance as if it were its own and the Custodian’s actions will be deemed to be those of the Borrower when assessing Events of Default. Lender will not be liable for the Custodian’s performance.
5.4(c) The Lender’s obligation to instruct Custodian to transfer Posted Collateral to Borrower will be deemed satisfied if the Lender validly instructs the Custodian under the Control Agreement. Lender will not be liable for any failure by Custodian to comply with its instructions and nor will such a failure be an Event of Default for Lender.

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Full text of Clause 5.4

5.4 Instructions relating to the Required Collateral Value and responsibility for the Custodian

5.4(a) Unless otherwise agreed, no later than the Notification Time on each Business Day:
5.4(a)(i) each Party will notify the other Party of its determination of the Required Collateral Value; and
5.4(a)(ii) each Party shall notify the Custodian in accordance with the terms of the Control Agreement of the Required Collateral Value so determined by it.
5.4(b) Borrower will be liable for the acts or omissions of Custodian to the same extent that Borrower would be liable hereunder for its own acts or omissions and any such act or omission of Custodian will be deemed to be the act or omission of Borrower for purposes of Paragraph 10.1. Lender will not be liable for the acts or omissions of Custodian.
5.4(c) Any obligation of Lender to instruct Custodian to transfer Posted Collateral to Borrower will be deemed satisfied by Lender sending appropriate instructions to Custodian in accordance with the terms of the Control Agreement. For the avoidance of doubt, Lender will bear no liability for any failure by Custodian to comply with such instructions and no failure by the Custodian to transfer Posted Collateral to Borrower under this Agreement will constitute an Event of Default with respect to Lender.

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Related agreements and comparisons

Related agreements: Click here for the same clause in the 2010 GMSLA
Comparison: Template:Gmsladiff 5.4

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Content and comparisons

This is an equivalent of the timing arrangements set out in Clause 5.8 of the 2010 GMSLA.
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Summary

Remember the theory here, in contrast to the 2018 Pledge GMSLA is that the Borrower is managing collateral in a triparty system, and the Lender is an agent lender acting on behalf of some other wealthy buy and hold investor who has no particular use for the Collateral being posted to it, other than to act as security. Thus the Collateral never leaves the Borrower’s beneficial ownership, but just moves between its tri-party “long-box” and its a triparty pledge account — being a separate account in its name, only pledged to the Lender. All these movements will be handled by the triparty agent without the Borrower’s intervention, assuming the Borrower has funded enough assets in its long-box in the first place. Which, unless it is properly going down the Swanee, it will have done automatically. This is a big, bulk business.

Therefore no need for detailed deadlines for request, delivery and other settlement arrangements: Collateral is not flying bodily around the clearing systems, but lying still and simply being re-badged in the triparty custodian's books and records.
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See also

Template:M sa Pledge GMSLA 5.4
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References