ISDA® Announces Revisions to 2003 Credit Derivatives Definitions | Practical Law

ISDA® Announces Revisions to 2003 Credit Derivatives Definitions | Practical Law

ISDA has issued a preliminary outline of its upcoming revisions to its 2003 Credit Derivatives Definitions, which apply to credit derivatives transactions such as credit default swaps (CDS). The revisions are expected to become effective on March 20, 2014.

ISDA® Announces Revisions to 2003 Credit Derivatives Definitions

Practical Law Legal Update 4-534-8885 (Approx. 3 pages)

ISDA® Announces Revisions to 2003 Credit Derivatives Definitions

by Practical Law Finance
Published on 18 Jul 2013 • International
ISDA has issued a preliminary outline of its upcoming revisions to its 2003 Credit Derivatives Definitions, which apply to credit derivatives transactions such as credit default swaps (CDS). The revisions are expected to become effective on March 20, 2014.
On July 15, 2013, ISDA® announced proposed amendments to the 2003 ISDA Credit Derivatives Definitions (CDDs) that are expected to become effective on March 20, 2014. The CDDs apply to credit derivatives such as credit default swaps (CDS).
The proposed amendments include:
  • A new credit event for instances in which a reference entity's debt is written down under a government-initiated bail-in. This credit event would apply only to new credit derivatives transactions entered into after the new definitions become effective.
  • A new provision allowing bonds of a sovereign reference entity to be converted into other assets in an "asset package" upon the occurrence of a credit event to reduce difficulties in settlement of sovereign CDS. This credit event would apply only to new credit derivatives transactions entered into after the new definitions become effective.
  • The introduction of standard reference obligations for frequently traded reference entities.
  • Changes to the successor provisions of the CDDs.
  • Amendments to the definitions of the following terms included in the CDDs:
    • Restructuring Credit Event;
    • Qualifying Guarantee;
    • Bankruptcy Credit Event.
For more information and a table summarizing the changes, with links to more detailed explanations, see ISDA's note on proposed changes to 2003 Credit Derivatives Definitions.
For general information on credit derivatives and the 2003 ISDA Credit Derivatives Definitions, see Practice Notes:
"ISDA" is a registered trademark of the International Swaps and Derivatives Association, Inc. (ISDA). ISDA is not a sponsor of Practical Law and had no part in the development of this resource.