ISDA® is a registered trademark of the International Swaps and Derivatives Association, Inc. Since 1985, ISDA has worked to make the global derivatives markets safer and more efficient. Today, ISDA has more than 900 member institutions from 69 countries. These members comprise a broad range of derivatives market participants, including corporations, investment managers, government and […]

Leverage means the relative size of an institution’s assets compared to that institution’s own funds. Need to say the banks are highly leveraged institutions as most of the funds are taken from bank’s clients. So banks use client’s money for their deals.The financial crisis in 2007 – 2008 like other crisis in the past was […]

Regarding to figure out how to stop banks failing it helps to start with an understanding of why they fail. There’s two basic risks that banks need to watch out for – (i) solvency and (ii) liquidity. Liquidity issues arise as a result of banks undertaking maturity transformation, which is obtaining short term deposits from […]

Since the establishment of the LMA in London (in 1996), total membership in the Association has grown steadily and currently stands at over 700 organisations covering in excess of 60 nationalities, comprising commercial and investment banks, institutional investors, law firms, service providers and rating agencies. The Loan Market Association has as its key objective improving […]

A usual condition of credit contract stipulating that in case of any adverse situation the Bank may terminate the contract based on Event of Default (EoD). Such negative situation might be for instance losing the license for core-business activities that would substantially effect the possibility of Borrower to repay the loan. Another example could be […]

protection tool in Derivatives (FX, IR and Commodities) to limit the opened loss position towards Counterparty throughout the entire life-time of the deal. This means that any deal may be concluded for longer period (like an FX-swap for 3YRS), however Margin call enables to assess the real market-to-market position stemming from movement of spot FX […]

Major ownership clause, same as MAC, also this one represents very often used condition within standardized legal documentation (like LMA for instance), which should secure that during the lifetime of the credit relationship, the parent company of the Borrower will not change. It is very crucial for “name-lending” deals, whereas the Creditor relies on the […]

a commitment of the Borrower not to create any liens/pledge over its assets in favor of other creditors, which should provide a certain risk mitigation in case of unsecured lending for all Borrowers (supposing they are Pari passu). This covenants should secure that in case of Event of Default there will be still left free […]

another regular covenant securing fair/equal treatment of all (same-ranked) creditors with respect to providing collateral resp. other benefits. Having said this, the Borrower should respect this condition with respect to all Creditors within Working-capital financing, and LT financing and/or for Senior-secured Creditors, however he may apply different approach across these levels of Creditors. This means, […]

a mitigation tool to offset outgoing and incoming payments to reduce the settlement risk; this mitigant is part of FX business and derivatives stipulation as concluded in respective documentation (like ISDA, TMA etc.) and is binding for both counterparties. Its main purpose is to reduce the necessity for exchanging whole notional flows and to minimize […]