27 June 2016
During the financial crisis, many institutions became well-acquainted with the close-out and valuations provisions of various contracts, as counterparties failed to meet margin calls and/or entered insolvency. In recent years there has been less cause to look at these provisions, while a body of case law post-financial crisis has provided additional guidance for institutions facing the need to close out transactions. Market volatility on Friday 24 June is expected to lead to margin calls in the following week, so this note sets out some reminders for institutions dealing with failures to pay to bear in mind, in particular in light of case law on these issues. This note considers close outs/terminations in general terms, rather than by reference to particular types of contract or particular contractual terms.