ING main colour palette ING secondary colour palette Map colours FillLine Do not put content in the brand signature area Overview of the English Law ISDA Credit Support Annex Michael Amos Global Legal Product Head Derivatives ING Bank N.V.

Do not put content in the brand signature area Wholesale Banking can be replaced with business unit 1 The ISDA Credit Support Documents 1994ISDA Credit Support Annex (Security Interest - New York Law) 1995ISDA Credit Support Deed (Security Interest - English Law) 1995ISDA Credit Support Annex (Transfer - English Law)

Do not put content in the brand signature area Wholesale Banking can be replaced with business unit 2 Common features of the ISDA Credit Support Documents each is designed to secure or support net exposure under an ISDA Master Agreement each is bilateral (but can be drafted as unilateral) each provides for periodic adjustment of collateral on a mark-to-market basis each permits considerable customising

Do not put content in the brand signature area Wholesale Banking can be replaced with business unit 3 Difficulties with charge-based form No use of collateral permitted Is it registrable? Perfecting security held by a financial intermediary Requirement to enforce the security

Do not put content in the brand signature area Wholesale Banking can be replaced with business unit 4 Title transfer collateral: key elements Outright transfer of cash and securities Conditional obligation to repay cash and re-deliver fungible securities Re-delivery obligation becomes debt obligation on default Set-off or netting of exposure against collateral value

Do not put content in the brand signature area Wholesale Banking can be replaced with business unit 5 Title transfer collateral: advantages Freedom to deal with collateral No “perfection” required Simpler document May avoid negative pledge May avoid insolvency stay or freeze

Do not put content in the brand signature area Wholesale Banking can be replaced with business unit 6 Title transfer collateral: potential disadvantages * Credit risk on collateral taker Tax issues Regulatory considerations Vulnerable internationally? -recharacterisation risk -enforceability of set-off/netting

Do not put content in the brand signature area Wholesale Banking can be replaced with business unit 7 Interpretation Paragraph 1 of the Annex Definitions and consistency The Parties: -Transferor and Transferee The Party which is net “in-the-money” (i.e. the Party which is exposed to credit risk on the other Party) is the Transferee and remains the Transferee until the other Party becomes net “in-the-money”

Do not put content in the brand signature area Wholesale Banking can be replaced with business unit 8 How is the collateral requirement calculated? Paragraph 2 of the Annex Compare collateral on hand with net exposure If exposure exceeds collateral, more collateral is required If collateral exceeds Exposure, the excess collateral is returned This leads to the apparent contradiction in terminology where the Transferee returns (i.e. does not transfer) collateral to the Transferor The Party which holds the Credit Support Balance remains the “Transferee” regardless of making “returns”

Do not put content in the brand signature area Wholesale Banking can be replaced with business unit 9 Collateral Requirement: ISDA Terminology Credit Support Amount Value

Do not put content in the brand signature area Wholesale Banking can be replaced with business unit 10 Collateral Requirement: ISDA Terminology Credit Support Balance Value Credit Support Amount

Do not put content in the brand signature area Wholesale Banking can be replaced with business unit 11 Collateral Requirement: ISDA Terminology Credit Support Amount Delivery Amount Credit Support Balance Value

Do not put content in the brand signature area Wholesale Banking can be replaced with business unit 12 Collateral Returns: ISDA Terminology Value Credit Support Amount

Do not put content in the brand signature area Wholesale Banking can be replaced with business unit 13 Collateral Returns: ISDA Terminology Credit Support Balance Value Credit Support Amount

Do not put content in the brand signature area Wholesale Banking can be replaced with business unit 14 Collateral Returns: ISDA Terminology Credit Support Balance Value Return Amount Credit Support Amount

Do not put content in the brand signature area Wholesale Banking can be replaced with business unit 15 How is the Credit Support Amount calculated? Remember, the Credit Support Amount is, in essence, adjusted Exposure Exposure is the total of the termination values of outstanding Transactions where “in the money” Transactions exceed “out of the money” Transactions (i.e. the credit risk on the Counterparty) So, it is calculated by -Determining the Exposure (in the Base Currency) -adding all Independent Amounts applicable to the Transferor and then -subtracting all Independent Amounts applicable to the Transferee and finally subtracting the Transferor's Threshold

Do not put content in the brand signature area Wholesale Banking can be replaced with business unit 16 How do you calculate the Delivery Amount? If the Delivery Amount exceeds Transferor's Minimum Transfer Amount, then the Transferor delivers that amount (subject to Rounding) of additional collateral to the Transferee If the Delivery Amount exceeds Transferor's Minimum Transfer Amount, then the Transferor delivers that amount (subject to Rounding) of additional collateral to the Transferee Delivery Amount equals the EXCESS of the Credit Support Amount (adjusted Exposure) OVER the Credit Support Balance (collateral on hand)

Do not put content in the brand signature area Wholesale Banking can be replaced with business unit 17 How is the value of the Credit Support Balance determined? Credit Support Balance is, in essence, collateral on hand. So it is calculated by valuing collateral on hand as provided in the final Paragraph. This includes: -Applying a “haircut” (valuation percentage) to securities (Valuation Percentage) and -Converting all values to the Base Currency -the “haircut” is excluded from the final calculation

Do not put content in the brand signature area Wholesale Banking can be replaced with business unit 18 Other matters affecting delivery and return of collateral amounts Paragraph 3 of the Annex Conditions Precedent -Transfers: manner and timing -Calculations -Substitutions/Exchanges of collateral

Do not put content in the brand signature area Wholesale Banking can be replaced with business unit 19 How do you calculate the Return Amount? If the Return Amount exceeds theTransferee's Minimum Transfer Amount, then the Transferee returns that amount of additional collateral (subject to Rounding) to the Transferor If the Return Amount exceeds theTransferee's Minimum Transfer Amount, then the Transferee returns that amount of additional collateral (subject to Rounding) to the Transferor Return Amount equals the EXCESS of the Credit Support Balance (collateral on hand) OVER The Credit Support Amount (adjusted exposure)

Do not put content in the brand signature area Wholesale Banking can be replaced with business unit 20 How are valuation disputes handled? Paragraph 4 of the Annex Undisputed amount is transferred Parties consult If dispute relates to Exposure, obtain Market Quotations If dispute relates to Value of collateral, resolve in manner stipulated in final Paragraph

Do not put content in the brand signature area Wholesale Banking can be replaced with business unit 21 How do you take collateral under the Annex? The Transferor delivers the assets to the Transferee together with full ownership interest No security interest is intended to be created The Transferee is free to deal with the collateral, including (but not limited to) the exercise of voting rights The Transferor is entitled to receive Equivalent Distributions The Transferee is subject to a conditional obligation to deliver fungible equivalent assets to the Transferor

Do not put content in the brand signature area Wholesale Banking can be replaced with business unit 22 How do you enforce the Annex? Paragraph 6 of the Annex The Value of the Credit Support Balance (collateral on hand) becomes an Unpaid Amount for purposes of the Section 6 of the ISDA Master Agreement Accordingly, the Annex relies on the effectiveness of the Section 6 close-out netting provisions