Template:Cross default in securities financing agreements: Difference between revisions

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→‎There’s no need to put one in. Even if you are doing term loans.

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 ===There’s no need to put one in. Even if you are doing [[term stock loan|term loans]].===
-All the talk of borrowers and lenders in [[Securities financing transaction - SFTR Provision|securities financing transactions]] makes a fellow giddy. But remember: [[SFTR|SFTs]] are ''not'' contracts of [[indebtedness]]. Even though they’re ''called'' “{{gmslaprov|Loan}} s”, they are not actually, you know, ''[[loan]]s''. {{gmslaprov|Lender}}s aren’t — legally or economically —''[[lender|lenders]]''<ref>If anything, a fully collateralised {{gmslaprov|Lender}}, benefitting from a 5-10% haircut, is a net ''borrower''. See [[Pledge GMSLA]] for what do about that if upsets your [[leverage ratio denominator]]. </ref>. Thus, there is [[cross default]] in any standard [[SFT - SFTR Provision|SFT]] agreements. This ''was not a mistake''. It was deliberate. You don’t need one.
+All the talk of borrowers and lenders in [[Securities financing transaction - SFTR Provision|securities financing transactions]] makes a fellow giddy. But remember: [[SFTR|SFTs]] are ''not'' contracts of [[indebtedness]]. Even though they’re ''called'' “{{gmslaprov|Loan}}s”, they are not actually, you know, ''[[loan]]s''. {{gmslaprov|Lender}}s aren’t — legally or economically —''[[lender|lenders]]''<ref>If anything, a fully collateralised {{gmslaprov|Lender}}, benefitting from a 5-10% haircut, is a net ''borrower''. See [[Pledge GMSLA]] for what do about that if upsets your [[leverage ratio denominator]]. </ref>. Thus, there is ''no'' [[cross default]] in any standard [[SFT - SFTR Provision|SFT]] agreements. This ''was not a mistake''. It was deliberate. You don’t need one.
 Now, there is a certain stripe of [[credit officer]] who will not be convinced of this, [[Cassanova’s advice|and will want to put one in anyway]]. Does it do any harm? Well ''yes'', actually: it creates [[contingent liquidity]] issues for your own treasury department, whom [[credit]] will routinely ignore when making their credit requests. And yes, from the perspective of production waste in the [[negotiation]] process: insisting on a [[cross default]] is, par excellence, the [[waste]] of {{wasteprov|over-processing}}.