cross-default clause definition

cross-default clause

Common stipulation in loan agreements under which a bank has a right to deny access to balances in any or all loan accounts to a borrower (with several loans at the same bank) even if only one loan goes into default. In fact, a bank can apply all available balance(s) in all account(s) of the borrower to satisfy any loan in default. Bankers justify this clause on the logic that a default sours the bank client relationship, not a just a loan agreement. See also cross collateral clause.

cross-default clause is in the Banking, Commerce & Finance and Corporate, Commercial, & General Law subjects.

cross-default clause appears in the definition of the following term: cross-collateral clause

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