Negative Interest - CSA Provision

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CSA Anatomy™


Interest Amount (VM)” means with respect to an Interest Period, the aggregate sum of the Base Currency Equivalents of the amounts of interest determined for each relevant currency and calculated for each day in that Interest Period on the portion of the Credit Support Balance (VM) comprised of cash in such currency, determined by the Valuation Agent for each such day as follows:

(i) the amount of cash in such currency on that day plus, only if “Daily Interest Compounding” is specified as applicable in Paragraph 11(g)(iii), the aggregate of each Interest Amount (VM) determined for each preceding day, if any, in that Interest Period; multiplied by
(ii) the relevant Interest Rate (VM) in effect for that day; divided by
(iii) 360 (or, in the case of pounds sterling or any other currency specified as an “A/365 Currency” in Paragraph 11(g)(i), 365),

provided that, unless “Negative Interest” is specified as applicable in Paragraph 11(g)(iii), if the Interest Amount (VM) for an Interest Period would be a negative amount, it will be deemed to be zero.

(View Template)

Interest Payer (VM)” means the Transferee, provided that if “Negative Interest” is specified as applicable in Paragraph 11(g)(iii) and an Interest Payment (VM) is determined in respect of a negative Interest Amount (VM), the Interest Payer (VM) in respect of such Interest Payment (VM) will be the Transferor.

(View Template)


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The 1995 CSA being a product of those happier, more innocent times where it seemed frankly comical that interest rates would go negative, it doesn’t deal awfully well with what one does if they do. the 2016 VM CSA marginally updates it, but really just to tweak the Interest Amount (VM) and Interest Payer (VM) and Interest Payment (VM) definitions to factor in payments going the wrong way, as it were.