Marking to Market of Collateral during the currency of a Loan on aggregated basis - GMSLA Provision: Difference between revisions

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Marking to Market of Collateral during the currency of a Loan on aggregated basis - GMSLA Provision (view source)

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{{gmslasnap|5.4}}
{{manual|MSG|2010|5.4|Section|5.3|medium}}
{{gmsla2000snap|5.4}}
====Commentary====
GMSLA allows you to specify that Collateral managed on an aggregate basis, under this Clause, or on a loan-by-loan basis under Clause {{gmslaprov|5.5}}. Generally speaking it is easier (and in a close out situation against a non-netting coiuntertparty, more capital effective) to collateralise on an aggregate basis under this Clause so this will be the strong preference for most counterparties except in fairly unusual or bespoke situations.
 
To Summarise:
 
Unless "single {{gmslaprov|Loan}} margining under {{gmslaprov|5.5}} applies:
:(a) '''{{gmslaprov|Required Collateral Value}}''': The aggregate {{gmslaprov|Market Value}} of {{gmslaprov|Posted Collateral}} in respect of all outstanding {{gmslaprov|Loans}} must equal the aggregate {{gmslaprov|Market Value}} of the {{gmslaprov|Loaned Securities}} plus applicable {{gmslaprov|Margin}}.
:(b) '''Excess {{gmslaprov|Collateral}}''': if the aggregate {{gmslaprov|Market Value}} of the {{gmslaprov|Posted Collateral}} plus: <br>
::(i) all unpaid amounts due by the {{gmslaprov|Lender}}; and <br>
::(ii) the {{gmslaprov|Market Value}} of {{gmslaprov|Income}} due on any {{gmslaprov|Non-Cash Collateral}} <br>
:exceeds the aggregate of the {{gmslaprov|Required Collateral Value}} plus:
::(i) all unpaid amounts due by the {{gmslaprov|Borrower}}; and
::(ii) the {{gmslaprov|Market Value}} of {{gmslaprov|Income}} due on the {{gmslaprov|Equivalent Securities}},<br>
:{{gmslaprov|Lender}} must repay to {{gmslaprov|Borrower}} such {{gmslaprov|Equivalent}} {{gmslaprov|Collateral}} as will eliminate the excess;
:(c) '''{{gmslaprov|Collateral}} Deficiency''': if the aggregate {{gmslaprov|Market Value}} of the {{gmslaprov|Posted Collateral}} plus: <br>
::(i) all unpaid amounts due by the {{gmslaprov|Lender}}; and <br>
::(ii) the {{gmslaprov|Market Value}} of {{gmslaprov|Income}} due on any {{gmslaprov|Non-Cash Collateral}} <br>
:falls below the aggregate {{gmslaprov|Required Collateral Value}} plus:
::(i) all unpaid amounts due by the {{gmslaprov|Borrower}}; and
::(ii) the {{gmslaprov|Market Value}} of {{gmslaprov|Income}} due on any {{gmslaprov|Equivalent Securities}},<br>
:{{gmslaprov|Borrower}} must provide such further {{gmslaprov|Collateral}} to {{gmslaprov|Lender}} as will eliminate the deficiency;<br>
:(d) '''Shorts and Longs''': where a {{gmslaprov|Party}} acts as both {{gmslaprov|Lender}} and {{gmslaprov|Borrower}} under this {{gmslaprov|Agreement}}, the provisions of paragraphs {{gmslaprov|5.4}}(b) and {{gmslaprov|5.4}}(c) shall apply separately (and without duplication) in respect of {{gmslaprov|Loans}} entered into by that {{gmslaprov|Party}} as {{gmslaprov|Lender}} and {{gmslaprov|Loans}} entered into by that {{gmslaprov|Party}} as {{gmslaprov|Borrower}}.
 
====See Also====
 
{{gmslaanatomy}}
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