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]] countertparty, 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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