Scotland: The Succession Event Question

In this note we analyse some of the consequences for sovereign CDS resulting from a vote for Scottish independence.

Scotland: The Succession Event Question A vote for an independent Scotland will have many consequences for the UK, as discussed in our recent client note¹. Unsurprisingly, the implications for UK sovereign CDS have not featured prominently in the public debate!

Independence for Scotland will, however, highlight some difficult issues that arise where a Sovereign Reference Entity loses territory or undergoes other significant change. There are important differences between the relevant provisions of the 2003 ISDA Credit Derivatives Definitions (the 2003 Definitions) and the 2014 ISDA Credit Derivative Definitions (the 2014 Definitions). The 2014 Definitions potentially clarify many of the uncertainties existing in the 2003 Definitions but difficult issues remain.