Swap Documentation – The ISDA Agreement

Most interest rate swaps are put in place under the framework of an ISDA Master Agreement (International Swaps and Derivatives Association).  The ISDA Master Agreement is a standard agreement used in over-the-counter derivatives transactions.  The agreement outlines the terms and conditions applying to any swap between a bank and a borrower.

The agreement provides both parties with clear definitions of all contract terms.  The Master Agreement is used by every bank, and it keeps the two parties from having to renegotiate terms for future transactions, saving time and legal fees.  The ISDA documentation for any swap consists of three parts:

  1. Master Agreement
  2. Schedule
  3. Confirmation

The Master Agreement is a boiler-plate document that defines terms, notices, remedies, etc.  There is no negotiation of terms in the Master Agreement.

The Schedule is a rider to the Master Agreement defining optional terms applicable to either the bank or the borrower.  It is in the Schedule where issues regarding default, Early Termination, downgrade provisions, transfers, and tax provisions are defined.  It is therefore important for a borrower have experienced representation in order to negotiate the most advantageous terms in the Schedule.

The Confirmation describes the economic details of an individual swap transaction.  DAG will make certain that the Confirmation accurately matches the terms of the transaction that was negotiated and that there are no errors or undefined terms.


Loan and Swap Terms and Conditions