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Template:M intro isda ISDA purpose: Difference between revisions
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There was once a time where the credit team might take a more lenient view for credit risk management purposes than the treasury team could for capital purposes. As the global financial crisis wore on, this sort of cavalier “[[IBGYBG]]” attitude gave way to a new austerity and credit teams started to think the better of this. (It probably didn’t make a lot of difference, really: you can make your credit line as big as you like, but if you have to gross your exposures for capital purposes you won’t be competitive in the market). | There was once a time where the credit team might take a more lenient view for credit risk management purposes than the treasury team could for capital purposes. As the global financial crisis wore on, this sort of cavalier “[[IBGYBG]]” attitude gave way to a new austerity and credit teams started to think the better of this. (It probably didn’t make a lot of difference, really: you can make your credit line as big as you like, but if you have to gross your exposures for capital purposes you won’t be competitive in the market). | ||
====Qualities of a good ISDA==== | |||
=====Clear===== | |||
The many purposes of the ISDA, most deal with the present (such as the availability of netting) or the past (reps, warranties and conditions to transacting), but only one deals with the future. The credit terms. These will only come into serious contemplation at times of ''extreme stress''. The more you stand to lose the more extreme circumstances are likely to be. Your management will certainly be going mad— take that for granted — but likely so will market, and quite possibly the geopolitical situation too. There are also likely to be multiple counterparty failures at once. All kinds of things will be stretching your attention and management's. Patience and a sense of humour will be in short supply. People will want short, clipped answers.The last thing anyone wants to hear is, “it’s complicated ” or “god forbid, the contract is not clear. | |||
=====Consistent===== | |||
=====Simple===== | |||