When you execute an interest rate swap with a bank, the credit support annex attached to your ISDA agreement determines how the mark to market exposure on that trade is managed between you and the bank over its life.
The credit support annex (CSA) to your ISDA agreement sets how the mark to market exposure on your hedges is managed between you and the bank.
There are three broad structures: no CSA, a collateralised CSA and a threshold CSA. Each trades operational burden against price.
Most corporates inherit the structure their first bank presented. The question is whether yours was chosen deliberately.
Most corporates inherit their CSA
In practice, most corporates end up with whatever structure their first bank presented. That CSA becomes the benchmark. When subsequent banks are onboarded, they are asked to mirror it. The logic is standardisation. The risk is that a structure that made sense when it was first signed may no longer reflect the corporate's current treasury setup, liquidity position, or hedging programme.
The three structures
There are three broad structures worth understanding.
No CSA
The first is no CSA. The ISDA stands alone and all trades are uncollateralised by default. Neither party posts margin regardless of where rates move. Simple operationally. No daily margin calls, no cash tied up as collateral.
The cost is in the pricing. The bank carries the full credit exposure for the life of the trade and charges for it through CVA, DVA, FVA and KVA embedded in your rate. CVA reflects the bank's counterparty credit risk on you. DVA reflects your credit risk on the bank, though not every institution applies this symmetrically. FVA covers the bank's funding cost on the uncollateralised exposure. KVA is the cost of regulatory capital the bank holds against the trade. On an uncollateralised structure that capital charge is higher, directly reflecting the credit risk the bank is carrying.
Collateralised CSA
A collateralised CSA means both parties post margin as the mark to market moves. Pricing is tighter because the bank's credit exposure is actively managed and the KVA reduces accordingly. For a cash rich corporate, posting collateral can also be a deliberate choice. Deploying that capital to reduce the implied cost of hedging is a genuine treasury decision, not just an operational concession.
Threshold CSA
A threshold CSA sits between the two. Neither party posts margin until the mark to market exposure exceeds an agreed threshold. It reduces operational burden while giving the bank partial credit mitigation, which improves pricing relative to a fully uncollateralised structure.
Chosen or inherited?
The right answer depends on your treasury setup, liquidity position, and the size and tenor of your hedge book. The more important question is whether the structure you are currently operating under was chosen deliberately or inherited by default.
First published as a LinkedIn post on 13 April 2026. Read and comment on LinkedIn.