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ARTICLE · 05 JUNE 2019

A Warning Regarding Negative Interest Rates

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The UK Court of Appeal has confirmed that no negative interest is payable on cash collateral posted under the standard form English law-governed ISDA 1995 the CSA unless counterparties made a specific election...

CanadaFinance and Banking
Patience Kalu Omokhodion
Patience Kalu Omokhodion
Mike Tallim
Mike Tallim
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The UK Court of Appeal (Civil Division) (the Court) has confirmed that no negative interest is payable on cash collateral posted under the standard form English law-governed ISDA 1995 Credit Support Annex (the CSA) unless counterparties made a specific election to the contrary under Paragraph 11. The decision further confirms that parties contracting using the CSA or engaged in any commercial finance transaction should expressly address the possibility and legal responsibility for payment of negative interest.

Background

On May 2, 2019, the Court's judgment in The State of the Netherlands v Deutsche Bank AG queried whether interest provisions under the CSA between The State of the Netherlands (the State) and Deutsche Bank AG (the Bank) captured negative interest rates.

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