Trigger event: Difference between revisions
imported>Doug Williamson (Update for LIBOR transition.) |
imported>Doug Williamson (Add definition - source - PRA - https://www.bankofengland.co.uk/prudential-regulation/publication/2022/november/implementation-of-the-basel-3-1-standards) |
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3. ''Documentation.'' | 3. ''Bank supervision - capital adequacy - Risk Weighted Assets - off balance sheet risk - transaction-related contingent items - performance guarantees.'' | ||
In relation to a performance guarantee or similar item issued by a bank, failure by the bank's customer to perform a non-financial obligation under the related commercial contract, enabling the beneficiary of the guarantee to make a claim on the bank. | |||
:<span style="color:#4B0082">'''''Trigger events differ from default events'''''</span> | |||
:"Trigger events occur when a counterparty fails to perform a non-financial obligation. | |||
:Trigger events differ from default events as trigger events relate to the underlying transaction (between the counterparty and third party) rather than whether the counterparty has defaulted or not. | |||
:When a trigger event occurs, it enables the third-party beneficiary to make a claim which the firm needs to pay, which means the exposure comes on-balance sheet." | |||
:''Implementation of the Basel 3.1 standards - Bank of England - November 2022 - p109.'' | |||
4. ''Documentation.'' | |||
More broadly, any event defined in documentation, which will result in another process being initiated. | More broadly, any event defined in documentation, which will result in another process being initiated. | ||
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== See also == | == See also == | ||
*[[Amendment approach]] | *[[Amendment approach]] | ||
*[[Bank of England]] | |||
*[[Basel 3.1]] | |||
*[[Beneficiary]] | |||
*[[Covenant]] | *[[Covenant]] | ||
*[[Covenant trigger]] | *[[Covenant trigger]] | ||
*[[Credit default swap]] | *[[Credit default swap]] | ||
*[[Credit event]] | *[[Credit event]] | ||
*[[Default]] | |||
*[[Derivative]] | *[[Derivative]] | ||
*[[Documentation]] | *[[Documentation]] | ||
*[[Event risk]] | *[[Event risk]] | ||
*[[Firm]] | |||
*[[Obligation]] | |||
*[[Performance guarantee]] | |||
*[[Prudential Regulation Authority]] (PRA) | |||
*[[Ratings trigger]] | *[[Ratings trigger]] | ||
*[[Third party]] | |||
*[[Transition]] | |||
==Other resource== | |||
*[https://www.bankofengland.co.uk/prudential-regulation/publication/2022/november/implementation-of-the-basel-3-1-standards Implementation of the Basel 3.1 standards - Bank of England - Prudential Regulation Authority - November 2022] | |||
[[Category:Accounting,_tax_and_regulation]] | [[Category:Accounting,_tax_and_regulation]] | ||
Revision as of 22:35, 3 March 2023
1. Borrowings documentation - credit risk.
An event defined in borrowings documentation, usually with severe adverse consequences for the borrower.
For example, a deterioration in the borrower's credit rating, entitling the lender to demand immediate repayment of the loan.
2. Derivative documentation.
Similar events defined in derivatives documentation, for example, credit default swaps.
3. Bank supervision - capital adequacy - Risk Weighted Assets - off balance sheet risk - transaction-related contingent items - performance guarantees.
In relation to a performance guarantee or similar item issued by a bank, failure by the bank's customer to perform a non-financial obligation under the related commercial contract, enabling the beneficiary of the guarantee to make a claim on the bank.
- Trigger events differ from default events
- "Trigger events occur when a counterparty fails to perform a non-financial obligation.
- Trigger events differ from default events as trigger events relate to the underlying transaction (between the counterparty and third party) rather than whether the counterparty has defaulted or not.
- When a trigger event occurs, it enables the third-party beneficiary to make a claim which the firm needs to pay, which means the exposure comes on-balance sheet."
- Implementation of the Basel 3.1 standards - Bank of England - November 2022 - p109.
4. Documentation.
More broadly, any event defined in documentation, which will result in another process being initiated.
For example, implementing an amendment approach to reference interest rate transition.
See also
- Amendment approach
- Bank of England
- Basel 3.1
- Beneficiary
- Covenant
- Covenant trigger
- Credit default swap
- Credit event
- Default
- Derivative
- Documentation
- Event risk
- Firm
- Obligation
- Performance guarantee
- Prudential Regulation Authority (PRA)
- Ratings trigger
- Third party
- Transition
