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Legal Update

Is a party obliged to pay negative interest on collateral provided under an English-law ISDA CSA?

10 August 2018
Mayer Brown Legal Update
Parties to an ISDA Master Agreement may choose to enter into a Credit Support Annex whereby one or both parties are obliged to post collateral. Commonly, there will be an obligation for the party receiving the collateral to pay interest on it, with the aim of making the provision of collateral reasonably economically neutral for both parties.

But what happens if the relevant reference interest rate is in effect negative? Does the party that posts collateral also have to pay interest on it to the receiving party? That is the question at the heart of a case recently considered by the English Court.

Authors

  • Chris Roberts
    Associate
    T +44 20 3130 3543
  • Susan Rosser
    T +44 20 3130 3358
  • Ian McDonald
    T +44 20 3130 3856
  • Chris Arnold
    T +44 20 3130 3610
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