About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

ISDA Leads Industry Effort to Standardize the Credit Support Annex

Subscribe to our newsletter

The International Swaps and Derivatives Association, Inc. (ISDA) today outlined key provisions to the Standard Credit Support Annex (SCSA) proposal as part of its continuing efforts to increase efficiency and improve standardization in the over-the-counter (OTC) derivatives markets.

The SCSA proposal addresses three primary objectives. The SCSA seeks to standardize market practices by removing embedded optionality in the existing CSA, promote the adoption of overnight index swap (OIS) discounting for derivatives, and align the mechanics and economics of collateralization between the bilateral and cleared OTC derivative markets. In addition, the SCSA seeks to create a homogeneous valuation framework, reducing current barriers to novation and valuation disputes.

“ISDA will continue to lead standardization initiatives in an effort to make global derivatives markets safer and more efficient,” said Conrad Voldstad, ISDA’s Chief Executive Officer. “The Standard CSA is the next step towards simplifying and standardizing market processes regarding collateralization.”

The SCSA proposal contains the operational mechanics of the current CSA but amends the collateral calculation so that derivative exposures and offsetting collateral are grouped into like currencies, or “silos”. The SCSA contemplates the sole use of cash as eligible collateral for Variation Margin (securities will still be permitted for Independent Amounts). Each currency silo is evaluated independently to generate a required movement of collateral in the relevant currency. This aligns bilateral collateral structures and economics to be more consistent with the London Clearing House (LCH) and other clearing houses that adopt consistent margin approaches.

The proposal also considers implementation issues, including the operational and technology impact of introducing the SCSA and the relationship between the new SCSA, existing CSAs and counterparty-level netting sets for termination and other purposes. The SCSA is a market-driven initiative with a flexible implementation approach that allows firms to move at the pace they deem appropriate.

This SCSA proposal was prepared by a Working Group of the ISDA Collateral Steering Committee, at the request of the ISDA Board. Regulators and legislators are actively encouraging dealers and trade associations to standardize their frameworks and processes.

A slide presentation, which provides an overview of the ISDA SCSA, is available at ISDA’s website.

Subscribe to our newsletter

Related content

WEBINAR

Upcoming Webinar: ESG data sourcing and management to meet your ESG strategy, objectives and timeline

Date: 11 June 2024 Time: 10:00am ET / 3:00pm London / 4:00pm CET Duration: 50 minutes ESG data plays a key role in research, fund product development, fund selection, asset selection, performance tracking, and client and regulatory reporting, yet it is not always easy to source and manage in a complete, transparent and timely manner....

BLOG

Banks Must Strengthen Data Management to Meet ESG Regulations

Europe’s banks must get their data management structures in place if they are to meet anticipated rules for identifying and mitigating ESG risks. ESG cannot be a mere afterthought in lenders’ risk management protocols if they are to meet anticipated new regulations, and that can be best achieved through careful data management, said Volker Lainer,...

EVENT

Data Management Summit New York City

Now in its 14th year the Data Management Summit NYC brings together the North American data management community to explore how data strategy is evolving to drive business outcomes and speed to market in changing times.

GUIDE

Best Practice Client Onboarding

Client onboarding is central to the success of banks, yet it continues to present challenges and the benefits of getting it right are difficult to achieve. The challenges arise from siloed systems, manual processes and poor entity data quality. The potential benefits of successful implementation include excellent client experience, improved client acquisition and loyalty, new business opportunities, reductions in costs, competitive advantage, and confidence in compliance.