Specified Indebtedness - ISDA Provision: Difference between revisions
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{{isdaanat|Specified Indebtedness}} | {{isdaanat|Specified Indebtedness}} | ||
A simple and innocuous enough provision. Almost redundant — why go to the trouble of defining borrowed money as another term? (because some firms, in their infinite wisdom, will wish to change the definition of borrowed money to include derivatives, other trading exposures, or even any payment obligations of any kind, and Specified Indebtedness is a (somewhat) less loaded label than | A simple and innocuous enough provision. Almost redundant — why go to the trouble of defining borrowed money as another term? (because some firms, in their infinite wisdom, will wish to change the definition of [[borrowed money]] to include derivatives, other trading exposures, or even any payment obligations of any kind, and {{isdaprov|Specified Indebtedness}} is a (somewhat) less loaded label than “borrowed money”)<ref>By the way, the [[JC]]’s personal view is that one should ''not'' widen the definition beyond the normal conception of “[[borrowed money]]”, and if one is a [[Bank/Credit Institution|bank]], may wish to ''narrow'' it, to exclude [[Deposit|deposits]]. See the article on ISDA’s {{isdaprov|Cross Default}} {{gmslaprov|Event of Default}} for more information.</ref>. | ||
In any case, what should one make of “[[borrowed money]]”? Could it include [[repo]] and stock loan]] obligations? Amounts owed to trade creditors? (In each case no, according to Simon Firth - see [[borrowed money|here]]) | In any case, what should one make of “[[borrowed money]]”? Could it include [[repo]] and stock loan]] obligations? Amounts owed to trade creditors? (In each case no, according to Simon Firth - see [[borrowed money|here]]) | ||
Revision as of 18:44, 19 March 2020
A simple and innocuous enough provision. Almost redundant — why go to the trouble of defining borrowed money as another term? (because some firms, in their infinite wisdom, will wish to change the definition of borrowed money to include derivatives, other trading exposures, or even any payment obligations of any kind, and Specified Indebtedness is a (somewhat) less loaded label than “borrowed money”)[1].
In any case, what should one make of “borrowed money”? Could it include repo and stock loan]] obligations? Amounts owed to trade creditors? (In each case no, according to Simon Firth - see here)
Of particular interest in the debate on Cross Default. Please refer to that section for a fuller discussion. see also the somewhat clumsier (but materially similar) definition of Specified Indebtedness in the EFET Master Agreement.
See also
- Cross Default (ISDA Master Agreement)
- cross default (generally)
References
- ↑ By the way, the JC’s personal view is that one should not widen the definition beyond the normal conception of “borrowed money”, and if one is a bank, may wish to narrow it, to exclude deposits. See the article on ISDA’s Cross Default Event of Default for more information.