Monthly Highlights: January 2017

Monthly Highlights: January 2017

Welcome to this month’s highlights from the Lexis®PSL Banking & Finance team which cover the key news updates from January 2017.


Article 50 appeal

R (on the application of Miller and another) v Secretary of State for Exiting the European Union; Re an application by Agnew and others for judicial review: reference by the Attorney General for Northern Ireland; Re an application by McCord for judicial review: reference by the Court of Appeal (Northern Ireland) [2017] UKSC 5

The Supreme Court (by majority) upheld the Divisional Court's decision that the Secretary of State For Exiting the European Union did not have power under the Crown's prerogative powers to give notice pursuant to Article 50 of the Treaty on European Union for the United Kingdom to withdraw from the EU. The authority of primary legislation was required before that course could be taken. Consequently, the Secretary of State's appeal against the High Court's decision would be dismissed. The Supreme Court further ruled on certain devolution questions referred to it by the Attorney General for Northern Ireland and the Court of Appeal, Northern Ireland.


Secured Transactions Law Reform Project publishes six discussion papers

The Secured Transactions Law Reform Project has published six discussion papers which discuss potential reforms in a number of key areas in secured transactions law. The papers look at potential reforms in:

  1. asset finance
  2. fixed and floating charges
  3. personal property security and consumers
  4. priorities
  5. registration, and
  6. sale of receivables

To view the papers, click here.

Possession/control of financial collateral—ECJ takes narrow interpretation

Private Equity Insurance Group SIA v 'Swedbank' AS [2016] All ER (D) 116 (Dec)

The European Court of Justice (ECJ) in this case decided that cash deposited in a current account is financial collateral regardless of whether or not the account is used in securities payment and settlement systems. However, this financial collateral will only fall within the scope of the Financial Collateral Directive (FCD) where it has been ‘provided’ to the collateral taker, ie the collateral provider is ‘prevented from disposing’ of the cash. The ECJ also confirmed that the FCD confers on collateral takers the right to enforce security notwithstanding the commencement of insolvency proceedings. For analysis on this case, see News Analysis: Possession/control of financial collateral—ECJ takes narrow interpretation (Private Equity Insurance Group SIA v Swedbank AS).

Acquisition finance

Loan Market Association (LMA) publishes mezzanine facility agreement drafting guide

The LMA has launched a new drafting guide for mezzanine facility agreements for use in leveraged acquisition finance transactions (the Mezzanine Guide).

The Mezzanine Guide was produced in response to demand from participants in the syndicated loan market to produce some guidance on drafting mezzanine facility agreements for leveraged transactions.  The Mezzanine Guide therefore illustrates the changes that might typically be made to a final form of senior facilities agreement when producing a mezzanine facility agreement based on the LMA leveraged facilities agreement.

The Mezzanine Guide is not structured as a template agreement. Instead the Mezzanine Document is presented as a drafting guide and is divided into three principal sections:

  1. Section 4 (Mezzanine Changes) outlines the amendments to be made to any given form of senior facilities agreement on a transaction to produce a form of mezzanine facility agreement based on that senior facilities agreement.
  2. Part I of Section 5 (Mezzanine Drafting) is a mark-up of the LMA Leveraged Document showing a recommended form of drafting to implement those amendments, and
  3. Part II of Section 5 (Mezzanine Drafting) is an unmarked form of that recommended form of drafting. As stated above, it is not intended to be used as a template agreement but is presented in this form to facilitate the reading of certain sections.

Consequential updates have been made to the LMA intercreditor agreement for leveraged acquisition finance transactions.

The Mezzanine Guide is available as a pdf on the LMA website and a webinar discussing the Mezzanine Guide will also be made available on the LMA website shortly.

Trade finance

Coface transfers French state export guarantees activity to Bpifrance

Coface has ceded its state export guarantees activity to the French public investment bank, Bpifrance. Management of French state export guarantees, or public guarantees, was a service that Coface carried out on behalf of the French state. The transfer took place on 31 December 2016 and the teams and IT systems involved in export guarantee activity have been included in the transfer to Bpifrance.

For more information on this development, see the press release.

Debt capital markets

ICMA publishes its quarterly report

The International Capital Markets Association (ICMA) published its quarterly report which assesses market practice and regulatory practice for the first quarter of 2017. The report predicts an uncertain future in the markets and more volatility. European regulation and the further development of Fintech are expected to be key themes for 2017. The Q1 2017 report outlines developments in the primary areas with which ICMA is engaged, including primary markets, secondary markets, repo and collateral markets, asset management and capital market products.

The report assesses activities in 2016 and looks ahead to 2017. It focuses on the Brexit negotiations and their effects on the international capital markets, social bonds and China's green bond market.


P.R.I.M.E. conference 2017

On 23 and 24 January, P.R.I.M.E. Finance held its sixth annual conference in The Hague, Netherlands.

At that conference, the chair of the European Securities and Markets Authority (ESMA), Steven Maijoor, spoke about the reforms of the over-the-counter (OTC) derivatives markets and benchmarks. He also discussed the system of third country equivalence in both of these reforms, and ESMA’s role as a mediator between national regulators.

Structured products and securitisation

Deutsche Bank fined $7.2bn for role in misleading investors over RMBS

Deutsche Bank will pay a $7.2bn settlement for misleading investors during its sale of residential mortgage-backed securities (RMBS) between 2006 and 2007, the US Department of Justice has announced. This is the largest RMBS resolution for the conduct of a single entity.

Regulation of derivatives and debt capital markets

Capital Markets Union

The European Commission has announced a public consultation ahead of its Capital Markets Union (CMU) mid-term review (MTR). Evidence-based feedback and specific operational suggestions are sought by 17 March 2017.

The Commission says input from the consultation, together with findings from its 2015 Call for Evidence on the EU regulatory framework for financial services, will help it take stock of the already adopted measures, help it plan new measures, and feed into the MTR.

Margin requirement clarification

The European Banking Authority (EBA) and ESMA have called for clarification of the requirements for credit, market, and counterparty credit risk in the Capital Requirements Regulation ((EU) 575/2013) (CRR) with the related obligations under EMIR. The aim is to ensure that only risks not already covered by specific financial resources for activities unrelated to clearing are to be covered by CRR requirements. ESMA and the EBA said this exclusion should also be extended to activities covered by interoperability arrangements.

Confirmation sought in relation to delegated regulations supplementing MiFID II

This week, the General Secretariat of the Council of the European Union has recommended that the Council confirm that it has no objection to delegated regulations adopted by the European Commission supplementing the Markets in Financial Instruments Directive (2014/65/EU) (MIFID II) with regard to position limits for commodity derivatives and the ancillary activities exemption in I/A item number 5096/14 and I/A item number 5096/16.


The application of the PRIIPs Regulation has been delayed by 12 months. Regulation (EU) 2016/2340 amends Regulation (EU) No 1286/2014, Article 34 to confirm it will now apply from 1 January 2018.

The European Supervisory Authorities (ESAs) responded to the European Commission (the Commission) on the amendments the Commission proposed to make to the draft regulatory technical standards (RTS) on key information documents (KIDs) for packaged retail and insurance-based investment products (PRIIPS).

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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.