The Credit Support Annex, CSA, is a document that sets out the conditions for making guarantees available in a derivative contract. It is part of the ISDA executive contract, the cover document that defines the terms and conditions between the contracting parties in a contract. The CSA is not obliged to be part of the master agreement, but in recent years it has become an important part of bilateral agreements over the counter. Following the IOSCO statement issued on 5 March 2019 and other regulatory guidelines on IM thresholds (click here for details), Credit Suisse does not propose to establish conditions of ownership and/or provide documentation im with a Phase 5 or 6 counterparty, whose exposure to IM will not immediately exceed the regulatory threshold of 50 million EUROS (or equivalent threshold). Under these conditions, Credit Suisse will continuously monitor our respective im-exposures internally. If our monitoring indicates that the IM threshold may exceed the threshold, we will endeavour to contact you in time to initiate the IM paper process. Each regulator has different rules for determining who is a mandatory entity and has defined its own compliance data and AANA thresholds, as well as a method of calculating AANA. Compliance dates for most regulators should, on the whole, provide for the following phases (note: the following thresholds are drawn from EU legislation and differ according to the final jurisdictional rules and the currencies differ according to the normal rate). According to global rules, the calculation of the initial margin should be based either on a tabular method or on an internal model, with a unilateral confidence interval of 99% over a period of “risk margin” (horizon) of at least 10 days. The initial margin is a risk-based calculation and is therefore very different from the margin of change (based on trade market values). Since January 2017, eMIR has been demanding large counterparties with unexplained over-the-counter derivatives of more than 3 trillion euros to exchange VM. As of March 1, 2017, the VM requirements extend to all other entities classified as financial counterparties (“CF”) under the EMIR Regulation, to non-financial counterparties that have over-ouning transactions that exceed the EMIR (NFC) clearing thresholds, and to transactions between these companies and all companies established outside the EU that, if created, would be in the EU FC or NFC. Derivatives transactions between a CF or an NFC with a non-financial counterparty with derivatives transactions below the EMIR (NFC) clearing thresholds are also subject to the requirements of the VM.
In response to the financial crisis, the G-20 commissioned the Basel Committee on Banking Supervision (BCBS) and the Board of Directors of the International Organization of Securities Commissions (IOSCO) to develop consistent global standards for centrally uncompensated non-compensated otC derivatives. In September 2013, IOSCO published a comprehensive policy framework and timetable for an over-the-counter margin reform aimed at reducing systemic risk by ensuring that safeguards are available to compensate for losses caused by the failure of a derivatives counterparty. The choice of the most appropriate margin approach for a given relationship depends on a number of factors, including: Credit quality refers to the solvency of a counterparty based on its credit quality (issued by a serious and widely recognized credit rating agency). Credit quality (increased) increases the need for guarantees. Indeed, the thresholds, initial margins and minimum transfer amounts can all be linked to credit quality.