2009 ISDA CREDIT DERIVATIVES DETERMINATIONS COMMITTEES AND AUCTION

2009 ISDA CREDIT DERIVATIVES DETERMINATIONS COMMITTEES AND AUCTION SETTLEMENT CDS PROTOCOL March 13, 2009 ISDA ® International Swaps and Derivatives Association, Inc. Copyright © 2009 International Swaps and Derivatives Association. Inc. ISDA ®

Agenda • What does the Protocol do? • Structure of Determinations Committee • Management of Trades under the Protocol • Credit Events • Auction Settlement • Succession Events • Which trades are covered and how? • Other changes to trading conventions (NOT implemented by the Protocol) • Next steps/deadlines • Questions ISDA ®

What does the Protocol Do? • Implements the Supplement to the 2003 ISDA Credit Derivatives Definitions (the “Supplement”) – Incorporates the Resolutions of the Determinations Committees (the “DC”) into Covered Transactions, superseding the role of the Calculation Agent for: • Credit Events • Auction Terms • Succession Events – Applies Auction Settlement as the Settlement Method for most Covered Transactions – Adds Credit and Succession Event Backstop Dates • To be effective, a Credit Event must occur no more than 60 days prior to notice to the DC • To be effective, a Succession Event must occur no more than 90 days prior to notice to the DC • Credit Events and Succession Events may be effective even if they occur prior to the Trade Date ISDA ®

The Determinations Committee • Structure of the Determinations Committees – 8 Global Dealers – 2 Regional Dealers for each Region – Regions: the Americas, Asia Ex-Japan, Australia-New Zealand, EMEA (Europe) and Japan – 5 Buyside Members – 2 non-voting Dealers, one global, one regional – One additional non-voting global dealer for the first year – 1 non-voting Buyside Member – ISDA as the DC Secretary • A DC will be formed for each of the Regions – Each DC will deliberate issues involving Reference Entities traded under Transaction Types of the relevant Region ISDA ®

The Determinations Committee • • Dealer inclusion on a DC based on trading volume Buyside Criteria for Inclusion on a DC – Inclusion in the Non-dealer Committee • At least $1 billion in assets under management (or the equivalent) • Notional single-name CDS trade exposure of at least $1 billion • Subject to veto by 2/3 of then-current Buyside Committee – Inclusion on a DC • Random selection from Non-dealer Committee • Serve for staggered one year terms ISDA ®

The Determinations Committee • A DC Question will automatically go to External Review if: • A DC holds a binding vote on questions regarding a – – – Credit Event Deliverable Obligation (or certain related issues) Succession Event Substitute Reference Obligation; or Merger of Reference Entity and Seller • AND an 80% supermajority is not achieved • External Reviewers selected at random from a pool of candidates nominated by any ISDA Member and confirmed by a Majority of a DC ISDA ®

The Determinations Committee • • DC Deliberations confidential until relevant information published The DC Secretary will publish: • All meeting requests and the supporting information submitted along with such request • Each convening of a DC and the questions to be deliberated • Each decision of a DC to not deliberate an issue, transfer a question or dismiss a question • Each binding vote of a DC, along with the identity and vote of each member • Any other information relating to the deliberations of a DC that a DC decides to publish by a Majority ISDA ®

Credit Event Management • • Bilateral notices not necessary if DC makes a ruling, but still applicable if it does not. DC’s determination applies to all Covered Transactions – Step 1 - notify DC Secretary • Must include PAI – Step 2 - at least one DC member must endorse the question. If question taken, relevant settlement timelines are extended. – Step 3 – DC may vote (by 80%) not to determine question – Step 4 – DC must determine the question by end of second Business Day, unless it votes (80%) to extend ISDA ®

Credit Event & Auction Timeline 30 calendar days minus 3 Business Days ** 10 calendar days Max. 40 hours DC Auction Convene DC * Auction Resolution DC Secretary determines relevant transaction type Publication of Draft Auction Terms Publication of Final List Eligible Market participant requests meeting in writing endorsed by DC Member of Deliverable Obligations *** Credit Event * If a binding vote was not held by email. ** Can be amended by Majority vote. *** See Deliverable Obligations timeline for more detail. Timeline subject to amendment by 80% vote. ISDA ®

Auction Management • • • If DC determines Credit Event has occurred, other than Restructuring, then DC determines whether to publish Auction Settlement Terms will be published for each Auction the DC determines should be held Auction-specific terms set by the DC by majority vote • • Auction Date Initial Bidding Information Publication Time Subsequent Bidding Information Publication Time Inside Market Quotation Amount Maximum Inside Market Bid-Offer Spread Minimum Number of Valid Inside Market Submissions DC determines Deliverable Obligations (80% vote) ISDA ®

Deliverable Obligation Timeline 2 calendar days * 3 calendar days * 5 calendar days * 3 calendar days * Deadline for eligible market participant to propose deliverable obligations Auction Resolution Publication of Supplemental List Publication of Initial List of Deliverable Obligation Publication of Final List of Deliverable Obligations Deadline for eligible market participant to challenge obligations on Supplemental List * If the day is not a Local Business Day, the following Local Business Day. Timeline subject to amendment by 80% vote. ISDA ®

Succession Event Management • • DC supplants role of Calculation Agent for Succession Event detrminations. DC’s determination applies to all Covered Transactions – Step 1 - notify DC Secretary – Step 2 - at least one DC member must endorse the question. If question taken, relevant settlement timelines are extended. – Step 3 – DC may vote (by 80%) not to determine question – Step 4 – DC must determine whether a Succession Event occurred – Step 5 – No earlier than 14 days after the event, DC meets to determine Succession Event. ISDA ®

Successon Event Timeline Max. 40 hours Minimum 14 calendar days 3 Business Days DC Succession Event Convene DC & vote on Succession Event and date thereof Reconvene DC DC Sec. determines relevant transaction type Eligible market participant requests meeting in writing endorsed by DC Member Reconvene DC to decide remaining questions & possibly cease for 3 days Timeline subject to amendment by 80% vote. ISDA ®

What Transactions are Covered? • Supplement incorporated into all Covered Transactions existing between adhering parties on April 7, 2009 – Nearly all types of transactions covered, except: • • Loan Only US Muni CDS on ABS or CDO Transactions excluded by bilateral agreement – Certain transactions are covered by the Protocol but excluded from the application of any Auction Settlement Terms • • Ref Ob only, Preferred CDS, Fixed Recovery Any Transaction for which the documents already say auction settlement will not apply. • Supplement also incorporated into future Covered Transactions (or novations) between adhering parties. – Amendments in Schedule 1 apply to all trades through January 31, 2011 unless parties enter into a Transaction on revised documentation that incorporates the Supplement. ISDA ®

What Transactions are Covered? • Determinations Committee and Auction Settlement effective for all existing and new Covered Transactions from April 8, 2009 • Credit and Succession Event Backstop Date provisions apply: – to new transactions other than index transactions beginning April 8, 2009 – to existing transactions other than index transactions beginning June 20, 2009 – to existing and new index transactions beginning June 20, 2009 (prior to that, the Effective Date will continue to be the Effective Date of the relevant roll). ISDA ®

Changes to Trading Conventions (NOT covered by Protocol) • Standard North American Corporate Contract – Restructuring not included – Standard coupons – Includes full first coupon (like accrued interest on a bond) • The changes above do not apply outside of the new Standard North American Corporate CDS contract • Existing trades are NOT affected by these changes ISDA ®

Next Steps/Deadlines • Adherence Process – – Protocol text to be published on ISDA’s website Adherence closes April 7 Adherence letters to be sent to ISDA Free to adhere • Firms interested in joining the Buyside Committee (including those wishing to be eligible to serve as a DC member) must notify ISDA by March 20, 2009 • First year’s DC to be formed March 31, 2009 ISDA ®

Questions? ISDA ®