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Template:GMSLA failures to return equivalent collateral: Difference between revisions
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Template:GMSLA failures to return equivalent collateral (view source)
Revision as of 10:14, 28 June 2019
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The GMSLA is deliberately designed so that the return of {{gmslaprov|Equivalent}} {{gmslaprov|Securities}}, or the return of {{gmslaprov|Equivalent}} {{gmslaprov|Collateral}}, is ''not'' an {{gmslaprov|Event of Default}}. | The GMSLA is deliberately designed so that the return of {{gmslaprov|Equivalent}} {{gmslaprov|Securities}}, or the return of {{gmslaprov|Equivalent}} {{gmslaprov|Collateral}}, is ''not'' an {{gmslaprov|Event of Default}}. | ||
These failures are designed to be caught by the {{gmslaprov|Mini-Closeout}} section, which gives the party expecting the redelivery a self-help, pre-default, remedy of [[Buy-In - GMSLA Provision|buying in]], liquidating {{gmslaprov| | These failures are designed to be caught by the {{gmslaprov|Mini-Closeout}} section, which gives the party expecting the redelivery a self-help, pre-default, remedy of [[Buy-In - GMSLA Provision|buying in]], liquidating {{gmslaprov|Securities}} or {{gmslaprov|Collateral}} that it holds, valuing the offsetting positions and calling for a cash payment. A failure to make that payment would be an {{gmslaprov|Event of Default}} (under {{gmslaprov|10.1(c)}}). | ||
The deficiency seems to be in not allowing for the {{gmslaprov|9.2}} close out right to attach to failures to return Collateral during the currency of a loan. I am not sure why that is missing, but it seems to me the correct approach should be to amend {{gmslaprov|9.2}} to say: | The deficiency seems to be in not allowing for the {{gmslaprov|9.2}} close out right to attach to failures to return Collateral during the currency of a loan. I am not sure why that is missing, but it seems to me the correct approach should be to amend {{gmslaprov|9.2}} to say: | ||
“If Lender fails to deliver {{gmslaprov|Equivalent}} {{gmslaprov|Collateral}} comprising Non Cash Collateral in accordance with paragraph 5.4, 8.4 or 8.5…” | “If Lender fails to deliver {{gmslaprov|Equivalent}} {{gmslaprov|Collateral}} comprising Non Cash Collateral in accordance with paragraph 5.4, 8.4 or 8.5…” | ||