Template:M summ 2002 ISDA Applicable Deferral Rate

Actually there are three Applicable Deferral Rates, depending on why a payment was deferred, and how long it has been deferred for.

• (a) If it is a 2(a)(iii) deferral, it is the actual rate the payer — being the one suspending the payment as a result of the other’s failure, of course — obtains in good faith in the inter-bank market.
• (b) If it is a deferral during a Force Majeure or Illegality waiting period, it’s that rate, only the payee gets to be consulted with about which bank it is. Yes, i know: — like, wow.
• (c) If the Waiting Period has expired but the Illegality or Force Majeure which is preventing the payment subsists, it is the average of the first such rate (that is, the one without consultation, so I suppose the payer can run off to a different bank, even though it consulted with the payee on the bank it used for the Waiting Period), but then it has to average that out against the payee’s cost of funding the amount it hasn’t received as a result of the suspension.

This might make sense as a piece of crystalline intellectual logic — so does an Yngwie Malmsteen guitar solo — but practically you have to wonder whether ISDA’s crack drafting squad™ hadn’t been hooking into the brandy a bit before knock-off time. I mean what on Earth were they thinking?