Template talk:Newcddmanual
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2014 ISDA Credit Derivatives Definitions A Jolly Contrarian owner’s manual™
4.8 in all its glory
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Overview
Not really any great comparisons here: this sort of event would be long since have triggered a Cross Default under an ISDA for example (assuming the Default Requirement triggered the Threshold Amount for a Cross Default — though the Default Requirement would likely be a lot lower — a credit insuitution’s Cross Default threshold would typically be in the order of 3% shareholder equity which, even if distressed, would be higher than the USD10mm fallback amount embedded in a Default Requirement).
Summary
This is designed to capture ad hoc bail-ins and BRRD action that may be taken to prop up or rescue regulated financial institutions which have fallen upon hard times.
It has lain there harmlessly biding its time for almost a decade — it did get a hit out for Banco Popular in 2017, though the circumstances were fairly straightforward there, as all subordinated debt was written down — but it looks like it is going to be right in the crosshairs when the Credit Suisse AT1 litigation kicks off later in 2023. The Credit Suisse AT1 write-down was confusing enough in itself: once you get to the Prior Deliverable Obligation terms — in play because the official list still listed a long-since matured CS subordinated bond which those responsible had omitted to update — well, we’re in legal eagle heaven.
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- The JC’s famous Nutshell™ summary of this clause
- Whatever is “irrespective of whether such event is expressly provided for under the terms of such Obligation” getting at?
- How all this relates to Credit Suisse and its notorious AT1s
See also
- Equity v credit derivatives showdown
- Good article from FT Alphaville on forthcoming Credit Suisse litigation