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New French law (VM) Collateral Annex: DIY, not readymade

On 7 June 2016, the Fédération Bancaire Française (“FBF”) and ISDA jointly published an Addendum to the ISDA 2016 Credit Support Annex for Variation Margin (VM) (Title Transfer – English law), recently redrafted to comply with the upcoming margin requirements for non-cleared derivatives.

The pre-printed form of the English law CSA is deemed to be entered into, and amended/supplemented by the Addendum to reflect necessary adjustments for the passage from:

  • ISDA Master Agreement to the AFB/FBF Master Agreement
  • English law to French law, in particular the Monetary and Financial Code

The addendum legally effects insertion, or deletion and replacement of 17 definitions in Paragraph 10 of the English law CSA, and insertion, or deletion and replacement in 9 other Paragraphs. Terms are not actually combined and consolidated in one document, leaving the parties to perform their own DIY exercise.

Keeping in mind that parties will engage in negotiation of Paragraph 11 Election and Variables and include further amendments, it is unfortunate that the structure of the French law Collateral Annex is not better designed for ease of use. In this context, French market participants might impress upon their industry association the value of consolidating the annex.

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