AI Summary of Article 206 Requirements for master netting agreements covering repurchase transactions or securities or commodities lending or borrowing transactions or other capital market driven transactions
Master netting agreements pertaining to repurchase, securities, or commodities lending or borrowing transactions may be recognised as permissible credit risk mitigation, provided the associated collateral adheres to the stipulations set forth in Article 207(2) to (4). It is essential that these agreements fulfil specific conditions.
Firstly, they must be legally binding and enforceable across all pertinent jurisdictions, even in scenarios of counterparty bankruptcy. Secondly, they should grant the non-defaulting party the authority to swiftly terminate and close-out all transactions in default situations. Lastly, these agreements must enable the netting of gains and losses, resulting in a single net payable amount between the parties.
Article 206 Requirements for master netting agreements covering repurchase transactions or securities or commodities lending or borrowing transactions or other capital market driven transactions
Master netting agreements covering repurchase transactions, securities or commodities lending or borrowing transactions or other capital market driven transactions shall qualify as an eligible form of credit risk mitigation where the collateral provided under those agreements meets all the requirements laid down in Article 207(2) to (4) and where all the following conditions are met:
(a) they are legally effective and enforceable in all relevant jurisdictions, including in the event of the bankruptcy or insolvency of the counterparty;
(b) they give the non-defaulting party the right to terminate and close-out in a timely manner all transactions under the agreement upon the event of default, including in the event of the bankruptcy or insolvency of the counterparty;
(c) they provide for the netting of gains and losses on transactions closed out under an agreement so that a single net amount is owed by one party to the other.