What is a Master Derivatives Agreement and when is it needed?
Borrowers are expected to enter into a market-based Master Derivatives Agreement (MDA) with IBRD prior to using any of stand-alone hedging products. This agreement provides the contractual framework between the borrower and IBRD. Once this agreement is in place, each hedge transaction executed by the borrower and IBRD will be documented by a confirmation, which will form part of the master agreement. It is expected that in most cases, the ISDA Master Agreement (Multicurrency-Cross Border) published by the International Swaps and Derivatives Association (ISDA) in 1992 will be used. In special circumstances, IBRD may consider entering in an individual (stand-alone) agreement to document one single hedge transaction. Before entering into any of the above derivatives agreements, the borrower and IBRD must review whether the borrower has the power and is authorized to enter into derivatives transactions, and otherwise is in a position to enter into derivatives transactions such as IBRD’s He
