ISDA has published a new interactive digital framework that market participants can use to help prepare for potential terminations of collateralized derivatives contracts.
Launch of the ISDA Close-out Framework is in response to the March 2023 failure of Signature Bank and SVB in the US, which highlighted the complexities of potentially terminating over-the-counter derivatives trading relationships following various post-crisis regulatory reforms. Specifically, in-scope entities are now required to post margin for non-cleared derivatives transactions, while various jurisdictions have introduced mandatory stays on termination rights and remedies as part of bank resolution regimes.
The ISDA Close-out Framework is intended to be used as a preparatory resource to help firms coordinate internal business functions and stakeholders and internal and external legal, operational, risk management, infrastructure and other relevant service providers to ensure they are adequately prepared for any potential future stress events.
The framework includes high-level analysis of the default mechanics and collateral enforcement provisions in ISDA documentation, along with additional commentary on bank resolution legislation in the US and Europe.
“Recent stress events have drummed home that terminating a portfolio of derivatives trades is now much more complex as a result of regulatory reforms. The introduction of mandatory margining and segregation requirements, alongside the implementation of bank resolution regimes, means firms need to be able to quickly respond to complex legal and operational issues that will require input from different teams across the organization. The ISDA Close-out Framework provides an essential interactive tool that firms can use to prepare ahead of any potential stress event,” said Katherine Tew Darras, ISDA’s General Counsel.
The ISDA Close-out Framework is available here: https://close-out.isda.org/#/.
Further information on the ISDA Close-out Framework is available here: https://assets.isda.org/media/5e46315f/06731822.pdf
For Press Queries, Please Contact:
Nick Sawyer, ISDA London, +44 20 3808 9740, nsawyer@isda.org
Joel Clark, ISDA London, +44 20 3808 9760, jclark@isda.org
Christopher Faimali, ISDA London, +44 20 3808 9736, cfaimali@isda.org
Nikki Lu, ISDA Hong Kong, +852 2200 5901, nlu@isda.org
Documents (1) for ISDA Publishes Framework to Prepare for Close Out of Derivatives Contracts
Latest
Updated OTC Derivatives Compliance Calendar
ISDA has updated its global calendar of compliance deadlines and regulatory dates for the over-the-counter (OTC) derivatives space.
ISDA/IIF Responds to the PRA Consultation
On July 30th, ISDA and IIF responded to the PRA consultation (CP10/25) on enhancing banks’ and insurers’ approaches to managing climate-related risks, which proposes updates to the Supervisory Statement 3/19 on climate-related risk management for banks and insurers. ISDA and...
ISDA Board Appoints New Chair
ISDA has announced that its Board of Directors has elected Amy Hong as its new Chair. Ms. Hong is Head of Strategy, Investments and Partnerships in the Global Banking & Markets division at Goldman Sachs, responsible for leading strategic initiatives...
Response on Scope of BMR
On July 28, ISDA and the Global Foreign Exchange Division of the Global Financial Markets Association responded to the European Commission’s (EC) consultation on the need to exempt spot foreign exchange (FX) benchmarks under Article 18a of the EU Benchmarks...