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Swaps chap 4

Discussion in 'SP5' started by dimitris13, Feb 28, 2020.

  1. dimitris13

    dimitris13 Member

    Hi there

    What does “providing neither client defaults on their swap” mean?
     
    dimitris13, Feb 28, 2020
    #1
  2. Colin McKee

    Colin McKee ActEd Tutor Staff Member

    It means that the statement is not the case if either of the bank's clients defaults and does not honour their agreement with the bank.
     
    Colin McKee, Feb 28, 2020
    #2
    dimitris13 likes this.
  3. dimitris13

    dimitris13 Member

    Dont understand the "statement". It means that the bank does / or doesnt not provide cover to for example company A in case company B defaults ? or is sth else?

    thanks
     
    dimitris13, Feb 28, 2020
    #3
  4. Colin McKee

    Colin McKee ActEd Tutor Staff Member

    The statement refers to the part in the core reading prior to the bit you have quoted in the question where it talks about the banks swap agreement. Company A and company B in your example above would be treated as separate customers and the default of one would not affect the security to the other. They are independent.
     
    Colin McKee, Feb 29, 2020
    #4
    dimitris13 likes this.

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