Isda 2002 Master Agreement Summary

11 Dec

The Captain`s Agreement is a document agreed between two parties, which sets standard conditions for all transactions between these parties. Each time a transaction is concluded, the terms of the framework agreement should not be renegotiated and applied automatically. This uniform approach to the agreement is an integral part of the structure and part of the network-based protection offered by the framework agreement. The fact that all transactions are the sole contract enhances the ability to close these transactions and obtain a one-time net amount payable in the event of default. The “Credit Event Upon Merger” redundancy event has been extended to include certain types of restructurings or restructurings (for example. B the change of control and some changes in capital structures). This enlargement had become common in their calendars by market participants. It goes without saying that the party or entity concerned still needs to be “much weaker” after the applicable event (as in the 1992 form) for a credit event to occur after the merger. The 2002 form specifies that the periods for determining whether a business is much weaker are “immediately after” the applicable event. The recipient`s tax representations in the calendar were updated in The 2002 Form. The provision of the “comprehensive agreement” contained in the 2002 form was supplemented by (i) an explicit recognition of the absence of assurances (other than those provided under the captain`s contract) and (ii) an explicit waiver of all rights and remedies (except fraud).

Representation on the 1992 form covered litigation against a party or its related companies. In Form 2002, representation applies to a party, its credit support providers and the corresponding entities indicated. The master`s agreement was updated in 2002 (known as ISDA Masteragrement 2002). The updated phase of the 1992 agreement has its roots in the succession of crises that affected global financial markets in the late 1990s. These events, including the liquidation of Hong Kong broker Peregrine Investments Holdings Holdings and the 1998 Russian financial crisis, tested ISDA documentation to an extent unknown to date. Although the ISDA documentation withstood this test, ISDA decided to put in place a strategic review of its documentation to see what lessons could be learned from these events. This revision resulted in a complete update to the 1992 agreement, which culminated in the 2002 agreement. While the ISDA master contract may seem scary at first glance with its long text (28 pages in its 2002 version) and several defined cross-cutting terms and references, it is an important document that outlines the general contractual relationship between the parties and should be used to ensure that the most important points for you have been addressed. The 2002 form contains many provisions to “rationalize” the document from a solvency perspective. These changes include: the above amendments apply only to the 1992 master agreement.

The 2002 Master Agreement rejected the first and second methods. In practice, the first method was very rarely chosen, as the financial institutions concerned had to declare their gross commitment and not the net commitment under the masteragrement.