Monthly Highlights: December 2020

Monthly Highlights: December 2020

Welcome to this month’s highlights from the Lexis®PSL Banking & Finance team which cover the key news updates from December 2020.


Brexit Bulletin—draft EU-UK Trade and Cooperation Agreement published

On 24 December 2020, the UK Government and the European Commission announced a deal in principle on the legal terms of the future UK-EU relationship. A copy of the draft Trade and Cooperation Agreement, agreed at negotiator level (to be ratified) has been published, along with a number of associated declarations and agreements including a separate Nuclear Cooperation Agreement and an Agreement on Security Procedures for Exchanging and Protecting Classified information.

Core Trade Documentation reviewed and published by LMA

The LMA published revised Secondary Terms and Conditions and Secondary Confidentiality Letters in preparation for the end of the Brexit transition period on 31 December 2020. The revised documentations will apply to all trades entered into on or after 1 January 2021. The revised Terms and Conditions also incorporate a bail-in clause, based on the LMA recommended form of bail-in clause, however, a bail-in clause has not yet been incorporated into the Multilateral Netting Agreement nor any of the Termination Agreements.

Beyond Brexit—DIT updates guidance on UK trade agreements with non-EU countries

The Department for International Trade (DIT) has published updated guidance on the status of trading arrangements taking effect following the end of the Brexit transition period on 31 December 2020 . While engagement is ongoing, and the DIT has confirmed that it is not expecting replacement trade arrangements to be in place with all countries in scope, some new/contingency trade deals have been signed. The guidance is updated to make it clear how those agreements will operate on 1 January 2021. While some of the agreements are fully ratified, others will apply on a provisional basis. Some agreements are not expected to be operational from 1 January 2021, including agreements with Canada and Mexico. These arrangements are expected to take effect in early 2021. Other deals remain under discussion with a number of countries, with engagement continuing into 2021—some of these countries have limited coverage via mutual recognition agreements (eg US, Australia and New Zealand), and some (but not all) are members of the World Trade Organization (WTO). Further new and updated guidance may be issued as various discussions progress, so stakeholders and traders are advised to monitor this page for further updates on the status of these discussions before and after IP completion day.


  1. GOV.UKGuidance: Existing UK trade agreements with non-EU countries

  2. GOV.UKGuidanceTrading under WTO rules

LIBOR and benchmarks

IBA launches consultation on intention to cease LIBOR publications

ICE Benchmark Administration Limited (IBA), the FCA-authorised and regulated administrator of LIBOR, has launched a consultation on its intention to cease publication of EUR LIBOR, CHF LIBOR, JPY LIBOR, GBP LIBOR and USD LIBOR after 31 December 2021 (or, in the case of USD LIBOR overnight and 1, 3, 6 and 12 months tenors, 30 June 2023). Feedback is sought by 5 pm London time on 25 January 2021.

An insufficient number of panel banks for EUR LIBOR, CHF LIBOR, JPY LIBOR, GBP LIBOR and USD LIBOR (1 week and 2 month tenors) have communicated to IBA that they would be willing to continue contributing after 31 December 2021 for IBA to be sure these settings could be continued on a representative basis after that date.

Any publication of the Overnight and 1, 3, 6 and 12 Months USD LIBOR settings based on panel bank submissions beyond 31 December 2021 will need to comply with applicable regulations, including as to representativeness. Based on current information from panel banks, IBA anticipates there being a representative panel for the continuation of these USD LIBOR settings through to 30 June 2023.

Source: ICE LIBOR consultation on potential cessation.

BoE director Hauser tells firms to prepare now for the end of LIBOR

The executive director for markets at the Bank of England (BoE), Andrew Hauser, has given a speech on the transition away from LIBOR, in which he highlighted three key actions for market participants in the months ahead: moving all new business off LIBOR, adopting the ISDA fallbacks for existing derivatives, and reducing the legacy of post-2021 LIBOR-linked contracts.

Source: Speech by Andrew Hauser—Bowing out gracefully: LIBOR’s retirement draws near.

Minutes of Working Group on Sterling Risk-Free Reference Rates published

The BoE has published the minutes of the Working Group on Sterling Risk-Free Reference Rates for September 2020. The Working Group on Sterling Risk-Free Reference Rates is made up of experts from major sterling swap dealers, who meet up to discuss the development of sterling risk-free reference rates.

Source: Minutes of the Working Group on Sterling Risk-Free Reference Rates—September 2020.

IBA launches new GBP SONIA ICE Swap Rate as benchmark for use by licensees

IBA, the FCA-authorised and regulated administrator of LIBOR, has launched its GBP SONIA ICE Swap Rate as a benchmark for use by licensees. The launch of the new benchmark follows a positive market response to feedback and consultation papers issued by IBA, and the successful publication of GBP SONIA ICE Swap Rate settings on an indicative ‘Beta’ basis since October 2020.

Source: ICE Benchmark Administration launches GBP SONIA ICE Swap Rate as a benchmark for use by licensees.

ARRC applauds announcements regarding transition away from USD LIBOR

The Alternative Reference Rates Committee (ARRC) has applauded the announcements by LIBOR’s administrator, its regulator, and US regulators, regarding the proposed path forward for the transition away from US Dollar (USD) LIBOR. The announcements include supervisory guidance which encourages banks to 'stop new USD LIBOR issuances by the end of 2021’. The announcements also detail plans to consult on specific timing for ceasing the publication of USD LIBOR, and propose end dates 'immediately following' 31 December 2021 publication for the one week and two month USD LIBOR settings, and the 30 June 2023 publication for other USD LIBOR tenors. The aim of this is to 'support a smooth transition for legacy contracts by allowing time for most to mature before USD LIBOR is proposed to cease, subject to consultation outcomes’.

Source: ARRC Applauds Major Milestone in Transition from U.S. Dollar LIBOR.


Furlough and loan schemes extended by Chancellor

The Chancellor announced that the furlough scheme is extended until late April 2021 where 80% of employees’ salary will continue to be paid, along with the government-guaranteed coronavirus business loan schemes extended until late of March 2021. The Chancellor further confirmed the Budget will be released on 3 March 2021 which aims to present ‘the next phase of the plan to tackle the virus and protect jobs’. At present, the Coronavirus Job Retention Scheme (CJRS) has safeguarded 9.6 million jobs in the UK, the Chancellor has said to review the ‘employer contribution element of the CJRS’. Businesses will be given an extension up to late March 2021 to access a variety of loan schemes which has already aided over £68bn in guaranteed loans that has safeguarded businesses affected by coronavirus. The government has stated that further support will be provided after March 2021 through a ‘successor loan scheme’, further details will be published in the course of time.

Source: Chancellor extends furlough and loan schemes.

Law Commission calls for evidence on smart contracts

The Law Commission has called for evidence to ensure the technology surrounding smart contracts can thrive in England and Wales. A smart contract is one that is legally binding in which some or all of the contractual obligations are recorded in or performed by a computer program. There are uncertainties about whether smart contracts are legally binding, how they are to be interpreted, how factors such as mistake can apply and remedies available. The responses to the call for evidence will progress the Law Commission’s smart contracts study, which will provide an account of the current law and set out how it will, or may, apply to smart contracts. The call for evidence will remain open until 31 March 2021.

Source: Law Commission seeks views on smart contract.

LMA releases best practice guide for term sheets in syndicated loans

The Loan Market Association (LMA) has published a best practice guide for ensuring completeness in term sheets provided to prospective participants in a syndicated loan transaction. the LMA and the European Leveraged Finance Association strongly recommend a ‘fulsome description’ of the provisions in the term sheet’s first draft. The guide is available to LMA members.


HMRC as a preferential creditor

HMRC has published new policy paper to explain how taxes paid by employees and customers are protected in insolvency procedures commencing after 1 December 2020.

Source: HMRC as a preferential creditor.

Alleged frustration of underlying contract due to coronavirus (COVID-19) restrictions

Salam Air SAOC v Latam Airlines Group SA [2020] EWHC 2414 (Comm)

An airline’s argument that the effects of the coronavirus pandemic had been such as to frustrate the leases of three aircraft so as to make it appropriate to injunct the lessor (Latam) from issuing demands under standby letters of credit in place to secure the advance monthly rentals on the aircraft was described as ‘weak’ in this case. The only continuing obligation of Latam, having delivered the aircraft pursuant to the terms of the lease was to fulfil its contractual promise that neither it nor anyone else would interfere with the use, possession and quiet enjoyment of the aircraft by Salam Air (Salam). The restriction on the operation of the aircraft by coronavirus regulations did not prevent either party from performing their contractual obligations. There was no frustration of purpose (as in Krell v Henry). Even if, as was arguable, Salam had informed Latam of the specific purpose for which they intended to lease the aircraft, that purpose did not become the joint purpose of Salam and Latam.

Islamic finance

FSB and IILM re-sign MoU on economic development in the Islamic financial services industry

The Islamic Financial Services Board (IFSB) and the International Islamic Liquidity Management Corporation (IILM) have signed, for the second time, a memorandum of understanding (MoU) to enhance their cooperation and collaboration to achieve their respective objectives and mandates in sustaining the stability and resilience of the Islamic financial services industry (IFSI).

Source: The IFSB and IILM Renew MoU to Emphasise on Economic Development in the Islamic Financial Services Industry.

IFSB Council announces adoption of two new standards for the Islamic financial services industry

The IFSB has announced at its 37th Meeting on 20 December 2020 in Kuala Lumpur, that it has resolved to approve the adoption of two new standards. The two new standards are IFSB-24: Guiding Principles on Investor Protection in Islamic Capital Markets, and IFSB-25: Disclosures to Promote Transparency and Market Discipline for Takāful/Retakāful Undertakings.

Source: The IFSB Council adopts two new Standards for the Islamic financial services industry.

BoE’s Hauser announces launch of new liquidity facility for Islamic finance

The executive director, markets, at the BoE, Andrew Hauser, has announced that the BoE will launch a new Shari’ah-compliant non-interest-based deposit facility in the first quarter of 2021. Speaking at UK Islamic Finance Week 2020, Hauser said the new Alternative Liquidity Facility (ALF) will be the first such account from a Western central bank.

Source: Why Islamic finance has an important role to play in supporting the recovery from COVID—and how the Bank of England’s new Alternative Liquidity Facility can help.

Project finance

Summary of Feedback on the Infrastructure Finance Review consultation published

HM Treasury has published a summary of consultation feedback for the Infrastructure Finance Review, which was announced in the 2019 Spring Budget and closed on 5 June 2019. The summary of feedback covers 117 responses from a range of sectors and highlighted key future market challenges including new technologies, market capacity and vulnerability, and the role of the European Investment Bank. The government’s full response can be found in the National Infrastructure Strategy, announced on 25 November 2020.

Source: Infrastructure Finance Review.

Real estate finance

Coronavirus (COVID-19)—business eviction ban extended to end of March 2021

The Ministry of Housing, Communities & Local Government has announced that the business eviction ban will be extended until the end of March 2021 in order to protect commercial tenants, who have been financially affected by the coronavirus (COVID-19) pandemic, from eviction. This final extension will provide landlords and tenants three months to come to an agreement on unpaid rent, with further guidance to support negotiations to be published in due course.

Source: Business evictions ban extended until March.

IASB proposes amending IFRS 16 to specify how companies measure lease liability

The International Accounting Standards Board (IASB) has launched a consultation which proposes amending International Financial Reporting Standard (IFRS) 16 on lease liability in a sale and leaseback. The proposal includes specifying how a company would measure the lease liability in such transactions, providing greater clarity for the company selling and leasing back, and ensuring IFRS 16 is applied consistently. Members can provide comments on the proposal until 29 March 2021 using their International Financial Reporting Standards Foundation login.

Source: Exposure Draft and comment letters: Lease Liability in a Sale and Leaseback.

Trade and commodity finance

UKEF’s General Exporting Facility scheme launched amid coronavirus (COVID-19)

UK Export Finance (UKEF) has announced the launch of the General Export Facility, in partnership with the UK’s leading commercial banks. The scheme will give exporting small and medium-sized enterprises (SMEs) access to the working capital they need to recover from the coronavirus (COVID-19) pandemic. Through the scheme, the UK Government can provide up to 80% guarantee on financial support from one of the UK’s five largest banks to support general exporting costs, up to the value of £25m.

Source: Radical shake up to government export finance support for small businesses.

UKEF signs co-operation agreement with Etihad Credit Insurance to support trade

UKEF has signed a co-operation agreement with Etihad Credit Insurance (ECI) with the aim of strengthening trade between the UK and the United Arab Emirates (UAE) and boosting investment. The agreement provides a framework for reinsurance between UKEF and ECI that allows for their financial support to be combined, enabling UK and UAE businesses to obtain export contracts globally. Additionally, UKEF is now able to support the export of products from the UAE where the transaction involves substantial trading.

Source: UKEF signs new export partnership with the UAE.

Sustainable finance

IOSCO supports creation of Sustainability Standards Board

The International Organization of Securities Commissions (IOSCO) has published its response to the International Financial Reporting Standards (IFRS) Foundation's consultation on sustainability reporting. IOSCO says it welcomes the consultation and supports the IFRS Foundation’s engagement in sustainability reporting. Additionally, IOSCO supports the creation of a Sustainability Standards Board (SSB), believing it can help meet shared objectives, provided the ‘requirements for success’ established in the consultation paper and other observations are met.

Letters to PRA CEOs prioritises climate change’s impact on finance

The BoE has published three letters from industry leaders to Chief Executive Officers (CEOs) of Prudential Regulation Authority (PRA)-regulated banks and firms. All three letters highlight the importance of financial risk as a result of climate change as being a priority for 2021 for CEOs. The letters set out that any approach to mitigate this must be proportionate to both the financial risk to an individual firm or bank and the complexity of its operations. This focus is a further iteration of the PRA’s 2019 supervisory statement to ensure mechanisms for managing climate-related financial risks are in place by the end of 2020.

Sources: Prudential regulation, Letter from Anna Sweeney and Charlotte Gerken ‘Insurance Supervision: 2021 Priorities’, Letter from David Bailey and Rebecca Jackson ‘International Banks Supervision: 2021 Priorities’ and Letter from Sarah Breeden and Melanie Beaman ‘UK Deposit Takers Supervision: 2021 Priorities’.

Sources: Prudential regulationLetter from Anna Sweeney and Charlotte Gerken ‘Insurance Supervision: 2021 Priorities’Letter from David Bailey and Rebecca Jackson ‘International Banks Supervision: 2021 Priorities’ and Letter from Sarah Breeden and Melanie Beaman ‘UK Deposit Takers Supervision: 2021 Priorities’.


ICC announces development of white paper on sustainability in export finance

The International Chamber of Commerce (ICC) Global Export Finance Committee’s Sustainability Working Group (ICC-SWG) has announced that it has commissioned International Financial Consulting Ltd and Acre Impact Capital to develop a white paper on sustainable finance across the export finance industry. The paper will 'review the state of sustainable finance across the export finance industry and propose both product and policy recommendations aimed at increasing the flow of export financing towards sustainable activity' and is due to be published in June 2021.

Source: ICC Sustainability Working Group announces new project to review the state of sustainable finance across the export finance industry.

ECB publishes guide on climate-related and environmental risks for banks

The European Central Bank (ECB) has published its final guide on climate-related and environmental risks for banks. The guide explains how the ECB expects banks to prudently manage and transparently disclose these risks under current prudential rules, and applies immediately.

Sources: ECB publishes final guide on climate-related and environmental risks for banksGuide on climate-related and environmental risks and ECB report on institutions’ climate-related and environmental risk disclosures.

Debt capital markets

ICMA publishes response to UK Listings Review call

The International Capital Market Association (ICMA) has responded to the UK Listings Review call for evidence suggesting that 'changes that could be made to the UK Prospectus Regulation while protecting the overall smooth functioning of the pan-European wholesale bond issuance process.' The response also suggests developing a suitable regulatory framework to allow a UK retail bond market to develop.

Source: ICMA responds to the UK Listings Review call for evidence.

FCA confirms mass-marketing ban of speculative mini-bonds in policy statement PS20/15

The FCA has published policy statement PS20/15: High-risk investments: Marketing speculative illiquid securities (including speculative mini-bonds) to retail investors, in which it has confirmed proposals to permanently ban the mass-marketing of speculative illiquid securities—including speculative mini-bonds—to retail investors.

Source: FCA confirms speculative mini-bond mass-marketing ban.


Verena Ross spells out CMU priorities for ESMA

The executive director of ESMA, Verena Ross, has given a speech in which she discussed the current challenges of the EU capital markets union (CMU) and some of the initiatives within the European Commission’s action plan that are of particular importance to ESMA.

Source: Keynote address—CMU and current challenges—Verena Ross, International Investors Conference Frankfurt.




FSB publishes 2020 progress report on OTC derivatives market reforms

The Financial Stability Board (FSB) has published its 2020 note on implementation progress of OTC derivatives market reforms. The FSB finds that overall progress in implementation of the agreed G20 reforms to over-the-counter (OTC) derivatives markets is well advanced, but there has been limited additional implementation of the reforms since October 2019.

Source: OTC derivatives market reforms: 2020 note on implementation progress.

Arbitration in banking and finance—new research project launched

Professor Dr Klaus Peter Berger, (KPB) Director of the Institute for Banking Law and Centre for Transnational law (CENTRAL) at the University of Cologne and P.R.I.M.E. Finance Expert, and P.R.I.M.E. Finance Head of Secretariat, Camilla Macpherson (CM), discuss a new project on arbitration in banking and finance led by Professor Berger in News Analysis: Arbitration in banking and finance—new research project launched.

ISDA developments

ISDA publishes seventh paper on smart derivatives contracts in FX market

The International Swaps and Derivatives Association (ISDA) has published the seventh in a series of legal guidelines for smart derivatives contracts, which aim to support technology developers, lawyers and other key stakeholders in the development of smart derivatives contracts and other technology solutions in the foreign exchange (FX) market. The guidelines provide high level background on the FX market, identify opportunities for the application of smart contract technology to FX and flag important issues for technology developers to consider when designing technology solutions for trading and FX associated processes.

Source: Legal Guidelines for Smart Derivatives Contracts: Foreign Exchange (FX) Derivatives.

ISDA and other industry bodies seek EMIR equivalence determination for UK regulated markets

Together with six other trade associations, ISDA has sent a 30 November 2020 letter to the European Commission asking it to issue an equivalence determination under Article 2a of the European Market Infrastructure Regulation (EMIR) for UK regulated markets. In the absence of equivalence, exchange-traded derivatives traded on UK regulated markets will be considered over-the-counter derivatives, pushing some non-financial counterparties and financial counterparties above the EMIR clearing threshold.

Source: Letter on equivalence of UK derivatives regulated markets under EMIR Article 2a.

Regulation of derivatives and structured products


FCA provides updates on UK EMIR notification requirements and equivalence

The FCA has updated its webpage which sets out news relating to EMIR. The November 2020 update provides information on the requirement to notify the FCA of clearing thresholds for UK financial counterparties (FCs) and non-financial counterparties (NFCs) under the retained EMIR (UK EMIR), and on the UK equivalence decision under UK EMIR for intragroup exemptions from the clearing obligation and margin requirements for uncleared derivatives.

Source: FCA updated webpage: EMIR news (November 2020 update).

Regulation for banking lawyers

European Commission announces new action plan on NPLs

The European Commission has announced a new action plan for tackling non-performing loans (NPLs) in the aftermath of the coronavirus (COVID-19) pandemic. Key measures include further developing secondary markets for distressed assets, converging insolvency frameworks across the EU, supporting the establishment and cooperation of national asset management companies (AMCs) at EU level, and outlining the precautionary tools provided by the EU bank crisis management and State aid frameworks.

Sources: Coronavirus response: Tackling non-performing loans (NPLs) to enable banks to support EU households and businessesAction plan: Tackling non-performing loans (NPLs) in the aftermath of the COVID-19 pandemicOpening remarks by Commissioner McGuinness at the press conference on the Action Plan for non-performing loans (NPLs)Questions and Answers: Tackling non-performing loans to enable banks to support EU households and businessesCOMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE EUROPEAN CENTRAL BANK: Tackling non-performing loans in the aftermath of the COVID-19 pandemicEBA welcomes European Commission’s action plan to tackle NPLs in the aftermath of the COVID-19 pandemic and AFME: Commission’s revised action plan for NPLs from Covid-19 disappoints.








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About the author:

Neeta started her legal career at Allen & Overy in 2008 in the midst of the global financial crisis and the collapse of Lehmans where she gained most of her paralegal experience.

Neeta also did a short stint in litigation at the Revenue and Customs Prosecutions Office in 2006. Neeta graduated with a 2:1 honours degree from University of London, Queen Mary College and went on to obtain a distinction from the College of Law in the Legal Practice. She has been working at Lexis Nexis since April 2013.