For
Immediate Release Friday, January 4, 2002
For More
Information, Please Contact:
Stacy Carey, ISDA
New York, (212) 332-1200; Fax (212) 332-1212; scarey@isda.org
NEW YORK, Friday, January 4, 2002 - The International Swaps and Derivatives Association (ISDA) welcomed implementation of provisions of Act CXX of 2001 on the Capital Markets (the “CMA”), which provide legal certainty to the enforceability of close-out netting in Hungary. The provisions, passed by the Hungarian Parliament on December 18, 2001, took effect on January 1, 2002.
“We are extremely pleased with
the passage and implementation of this important legislation,” said Robert G.
Pickel, ISDA’s Executive Director and Chief Executive
Officer. “The CMA is a significant achievement ensuring the enforceability of
ISDA Master Agreement netting provisions in
Close-out netting of derivative transactions, which reduces credit risk arising from OTC derivatives by allowing counterparties to net their obligations, pursuant to a netting agreement is a legal and enforceable mechanism for calculating a claim against an insolvent counterparty under the CMA. The provision prohibits the insolvency officer from any attempt of “cherry-picking” between in-the-money and out-of-the-money transactions. The CMA also makes it clear that close-out netting cannot be treated by any person as an agreement intended to defraud other creditors and decrease the assets of the debtor. Finally, the CMA defines the term “close-out netting” to include the latest derivatives products in the calculation mechanism.