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Template:Set-off and netting: Difference between revisions
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So if one of my [[master agreement]]s has a broad [[set-off]] provision (as well as its [[close-out netting]] provision), and my [[netting opinion]] says the set off (of amounts due under other master agreements) would also be enforceable, can I then treat all my exposures against that counterparty, across all master agreements, as nettable down to a single obligation? | So if one of my [[master agreement]]s has a broad [[set-off]] provision (as well as its [[close-out netting]] provision), and my [[netting opinion]] says the set off (of amounts due under other master agreements) would also be enforceable, can I then treat all my exposures against that counterparty, across all master agreements, as nettable down to a single obligation? | ||
Sorry to be the bearer of the buzzkill, but no. You need a “written, bilateral netting agreement that creates a single legal obligation, covering all included bilateral master agreements and transactions” (a “[[cross product netting arrangement]]”), itself supported by a [[netting opinion]]. See Rule CRE53.61-9 of the [[Basel framework]]<ref>https://www.bis.org/basel_framework/chapter/CRE/53.htm</ref> This might be, for example, | Sorry to be the bearer of the buzzkill, but no. You need a “written, bilateral netting agreement that creates a single legal obligation, covering all included bilateral master agreements and transactions” (a “[[cross product netting arrangement]]”), itself supported by a [[netting opinion]]. See Rule CRE53.61-9 of the [[Basel framework]]<ref>https://www.bis.org/basel_framework/chapter/CRE/53.htm</ref> This might be, for example, the joint-association-published [[Cross-Product Master Agreement]] - and most [[prime brokerage agreement]]s do this too. | ||
But also check whether your own firm’s operational systems are capable of recognising cross-product netting arrangements. From personal experience, the [[JC]] suspects many aren’t. | But even if you have got a [[master netting agreement]], also check whether your own firm’s operational systems are capable of recognising cross-product netting arrangements as a practical matter. From personal experience, the [[JC]] suspects many aren’t. If the computers can’t do it, your [[CPMA]] and your [[netting opinion]]s are as good as a chocolate starfish. <br> | ||