A no deal Brexit—what are the key concerns for the lending market?

A no deal Brexit—what are the key concerns for the lending market?

The Loan Market Association (LMA) has published a paper on the consequences of a no deal Brexit on the European loan market. This news analysis summarises the key concerns highlighted by the paper.

What is the background to the paper?

The LMA has published a paper on the consequences of a no deal Brexit on the European loan market in response to concerns by its members that the UK may withdraw from the EU without a deal being agreed. The paper focuses on the impact of a no deal Brexit on UK lenders lending to borrowers in EU27 jurisdictions (ie outbound lending). The impact on EU27 lenders lending into the UK (ie inbound lending) is expected to be minimised by the government's proposed temporary permissions and recognition regime which will allow EU27 institutions to continue their financial services activities in the UK for a limited time post Brexit.

The paper highlights the high risk of significant market disruption and loss of liquidity detrimental to both the UK and the EU 27 in the event of a no deal Brexit due to:

  • the wide usage of wholesale loan products across the EU27,
  • the cross-border nature of lending,
  • the differences in loan market regulatory requirements between individual EU member states, and
  • the heavy reliance of borrowers on the loan product for their day to day business needs

What key areas of concern does the paper identify?

The paper highlights the following as key areas of concern in a no deal Brexit scenario:

  • the risk to new and existing business of the loss of passporting rights,
  • risks to the validity and enforceability of existing loan contracts,
  • the impact on the syndicated loan market in terms of jurisdiction and enforceability of judgments,
  • the fact that 'lending' is not carried out in isolation and ancillary products and services may require a licence, even if lending is permitted without one, and
  • numerous other ancillary regulatory issues of concern

In what ways is the potential loss of passporting rights an issue?

The paper explains that regulation of cross-border lendin

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About the author:

Meet Miranda:

1. Banking and finance lawyer with experience in leveraged finance, real estate finance and restructuring

2. Likes Spanish cooking, playing the piano and planning adventures

3. Thinks the law is a necessary evil

Miranda is a solicitor specialising in leveraged and acquisition finance. She trained at Hogan Lovells International LLP and qualified into the international banking and finance team. During her time at Hogan Lovells she worked on a variety of domestic and cross-border transactions, acting for both borrowers and lenders. She also experienced secondments to Barclays Bank PLC and Kaupthing Bank hf.