The Credit Support Agreement is a critical document in financial transactions where one party seeks to mitigate credit risk by requiring collateral or other forms of credit support from its counterparty. Under Hong Kong law, this agreement type is commonly used in derivatives trading, securities lending, and other financial arrangements where credit exposure needs to be managed. The document details the operational aspects of credit support arrangements, including calculation methodologies, eligible collateral types, transfer timing, and enforcement mechanisms. It must comply with Hong Kong's sophisticated financial regulatory framework, particularly the Securities and Futures Ordinance and Banking Ordinance. The agreement is especially relevant in the context of Hong Kong's position as a major financial center, where it frequently governs both domestic and international financial relationships involving Hong Kong-based entities or those choosing Hong Kong law for its well-developed commercial legal system.
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1. Parties: Identification of the credit support provider and credit support receiver, including full legal names and addresses
2. Background: Context of the agreement, reference to underlying obligations or master agreement, and purpose of the credit support arrangement
3. Definitions and Interpretation: Definitions of key terms, interpretation rules, and references to any external definitions (e.g., ISDA definitions if applicable)
4. Credit Support Obligations: Core obligations regarding posting of credit support, including timing, calculation of amounts, and delivery methods
5. Conditions Precedent: Conditions that must be satisfied before credit support obligations become effective
6. Representations and Warranties: Standard and specific representations regarding capacity, authority, and ownership of posted collateral
7. Transfer and Release of Credit Support: Procedures and timing for transferring and releasing credit support, including substitution rights
8. Valuation and Calculations: Methods for valuing posted credit support and calculating required amounts
9. Default and Enforcement: Events of default, consequences, and enforcement mechanisms
10. Interest and Distributions: Treatment of interest or distributions on posted collateral
11. Tax Provisions: Handling of tax implications related to credit support
12. Costs and Expenses: Allocation of costs related to posting, maintaining, and enforcing credit support
13. Notices: Communication procedures and contact details
14. Governing Law and Jurisdiction: Specification of Hong Kong law as governing law and jurisdiction provisions
1. Third Party Security Provider Provisions: Required when credit support is provided by a party other than the principal obligor
2. Multiple Currency Provisions: Required when credit support may be provided in multiple currencies
3. Custodian Arrangements: Required when a third-party custodian holds the credit support
4. Special Regulatory Provisions: Required for regulated entities subject to specific regulatory requirements
5. Set-off Rights: Optional provisions for additional set-off rights
6. Early Termination: Optional provisions for early termination rights specific to the credit support arrangement
7. Agency Provisions: Required when any party acts through an agent
8. Eligible Credit Support: Detailed provisions about types of acceptable credit support when multiple options are available
1. Credit Support Details: Detailed specifications of credit support amounts, thresholds, and minimum transfer amounts
2. Eligible Credit Support and Valuations: List of acceptable forms of credit support and their valuation percentages
3. Form of Transfer Documents: Standard forms for transfer notices and acknowledgments
4. Authorized Persons: List of authorized signatories and contact details for operational matters
5. Custodian Details: Details of any custodian arrangements and operating procedures
6. Form of Legal Opinions: Required forms of legal opinions for conditions precedent
7. Security Documents: Forms of any additional security documents required
8. Calculation Examples: Examples illustrating the calculation of credit support amounts and valuations
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