Monthly Highlights: August 2016

Welcome to this month’s highlights from the Lexis®PSL Banking & Finance team which cover the key news updates from August 2016.

Brexit

The following Brexit news analysis has been published on our blog during August 2016:

Debt capital markets: Piers Summerfield, partner at Simmons and Simmons, looks at how the UK’s vote to leave the EU may impact on debt securities. See News Analysis: Brexit and debt capital markets

Capital Markets Union: Peter Workman, partner at PwC, discusses the impact of Brexit on the UK’s participation in the Capital Markets Union (CMU) project. See News Analysis: Brexit and the future of the Capital Markets Union

Derivatives: Nigel Dickinson, partner, and Victoria Nevins, associate, at Norton Rose Fulbright LLP discuss the potential implications of Brexit on the derivatives market in News Analysis: The impact of Brexit on derivatives

Leverage finance: Matthew Dunn, partner at Clifford Chance, discusses the potential implications for leveraged finance following the UK’s decision to leave the EU in News Analysis: Brexit—examining the implications for leveraged finance

Lending

Loan Syndications and Trading Association (LSTA) issues draft guidance for US sanctions issues in lending transactions

The LSTA has published an updated version of its 'LSTA Guidance Regarding US Sanctions Issues in Lending Transactions'. The new Guidance reflects the developments in this area since the LSTA's Guidance was first published in Q1 2014.

The Guidance sets out the key Office of Foreign Assets Control (OFAC) prohibitions relevant to those involved in lending transactions in the US syndicated loan market and offers tips for how lenders should protect themselves from sanctions-related risks when negotiating credit agreements.

The Guidance will be published in final form on 1 September 2016. It is available to LTSA members on their website.

Loan Market Association (LMA) publishes new bail-in drafting

The LMA has published updated versions of the LMA Recommended Form of Bail-in Clause and Users Guide and EU Bail-in Legislation Schedule on the 'Documents & Guidelines' section of the LMA website.

The updates reflect:

  • Polish legislation implementing the Bank Recovery and Resolution Directive 2014/59/EU (BRRD) coming into effect
  • changes to the relevant legislative framework in Cyprus
  • the publication of the final regulatory technical standards (RTS) under the BRRD relating to the contractual recognition of write-down and conversion powers (Commission Delegated Regulation (EU) 2016/1075)—the RTS came into effect on 28 July 2016 and are unchanged from the draft version adopted by the European Commission in March 2016, and

  • the publication by the Prudential Regulatory Authority on 29 June 2016 of its policy statement and revised rules (PS17/16) providing for an 'impracticability' exception to the contractual recognition of bail-in rules

The new rules came into effect on 1 August 2016.

Debt capital markets

First offshore rupee-denominated ‘masala’ bond listed on LSE

The world’s first ever rupee-denominated or ‘masala’ bond issued outside of India by an Indian company was listed on the London Stock Exchange on 1 August 2016. The listing was from the Housing Development Finance Corporation, one of India’s biggest banks and India’s leading provider of finance for housing. For more information, see the HM Treasury press release.

Derivatives

ISDA 2016 Variation Margin Protocol

On 16 August, ISDA launched the ISDA 2016 Variation Margin Protocol (the Protocol) that will help market participants comply with new variation margin requirements due to come into force from March 2017. The Protocol enables counterparties to quickly and efficiently put contractual documentation in place with multiple counterparties in order to implement the margin requirements, or to make changes to existing collateral agreements to bring them into compliance. By using the Protocol counterparties will be able to amend multiple collateral documents without having to amend them individually.

For the Protocol to be adhered to, counterparties must submit an adherence letter, pay a fee and comply with the additional bilateral information delivery requirements. Each counterparty must deliver a completed questionnaire which must be matching (a Matched Questionnaire) to another adhering party for the Protocol to be effective with that adhering party. This can be done via ISDA Amend.

A counterparty pair can make one of four types of documentation change using the Protocol:

  • create a new ISDA 2002 Master Agreement with a new Credit Support Annex (CSA) for variation margin
  • amend an existing master agreement to add a new CSA for variation margin on terms that are determined by the Protocol and the parties’ Matched Questionnaires
  • amend an existing master agreement and CSA by replicating that CSA and then amending it to comply with the new margin requirements, and
  • amend an existing CSA so that it complies with the margin requirements

The Protocol is open for adherence here.

Regulation for banking lawyers

Financial Conduct Authority (FCA) launches second consultation on MiFID II implementation

The FCA has published a second consultation paper seeking feedback on the implementation of the Markets in Financial Instruments Directive 2014/65/EU (MiFID II). The deadline for responses is 28 October 2016. Further information about the consultation is available here on the FCA website.

Relevant Articles
Area of Interest