Monthly highlights: June 2021

Monthly highlights: June 2021

Welcome to this month’s highlights from the Lexis®PSL Banking & Finance team which cover the key news updates from June 2021.

LIBOR data-sf-ec-immutable="" and benchmarks

BoE publishes minutes of the May 2021 meeting of the Working Group on Sterling Risk-Free Reference Rates

The Bank of England (BoE) has published the minutes of the 11 May 2021 meeting of the Working Group on Sterling Risk-Free Reference Rates (RFRWG). The meeting reviewed general progress made on LIBOR transition with specific updates on bond, loan and derivative markets.

Source: Minutes of the Working Group on Sterling Risk-Free Reference Rates—May 2021.

FMLC responds to FCA consultation on new powers over use of critical benchmarks

The Financial Markets Law Committee (FMLC) has published its response to the Financial Conduct Authority’s (FCA) consultation on its new powers to manage an orderly wind-down of critical benchmarks. These powers were added to Retained Regulation (EU) 2016/1011 (UK Benchmarks Regulation) by the Financial Services Act 2021.

Source: Response to FCA consultation: New powers over use of critical benchmarks under the Benchmarks Regulation.

LMA developments

LMA publishes new Exposure Draft documents

The Loan Market Association (LMA) has announced the publication of Exposure Drafts of LMA Trade Confirmation (Claims) and LMA Trade Confirmation (Risk Participation). This follows on from the recent release of the Exposure Draft for Standard Terms and Conditions for secondary debt trading, accompanying Explanatory Note and updated Trade Confirmation (Bank Debt), and forms part of the LMA's strategy to facilitate secondary loan market trading as the syndicated loan market transitions away from the use of LIBOR to risk-free rates.

Source: LMA Publishes Exposure Draft Trade Confirmations.

Best practice guide for GBP referencing loans updated by £RFR Working Group

The LMA has announced that the Sterling Working Group on Risk-Free Reference Rates (the £RFR Working Group) has published an updated version of its Best Practice Guide for GBP Loans to include a technical appendix for Cost of Carry. The £RFR Working Group recognised that in the appendix, there may be practical constraints and systems limitations impacting the ability of secondary market participants to calculate Cost of Carry. In light of these practical challenges, the technical appendix addresses possible options.

Source: £RFR Working Group publishes updated best practice guide for GBP referencing loans including technical appendix on Cost of Carry for secondary loan market trading.

LMA publishes recommended reference rate selection agreement

The LMA has also published a new document for its members—an LMA recommended form of reference rate selection agreement for use in relation to legacy transactions and the transition to alternative reference rates.

Source: Documents & Guidelines.

LMA publishes further documents to aid in LIBOR transition

The LMA has published further documents to assist in the transition away from the use of LIBOR to compounded RFRs. Further, the LMA has updated existing RFR documentation to reflect changes in the post-Brexit bail-in provisions and in light of the recommendations of the euro risk free rate working group on EURIBOR fallback trigger events and €STR based EURIBOR fallback rates. The documents are available to LMA members and include versions of the existing suite of investment grade facility agreements, forms of the designated entity clause, a version of the secured single currency term facility for developing markets transitions and a drafting guide.

Source: Documentation Alert.

ISLA publishes standard form changes to LIBOR references in the GMSLA

The International Securities Lending Association (ISLA) has published changes to LIBOR references in the Global Master Securities Lending Agreement (GMSLA). ISLA has produced a standard form amendment to assist market participants in their efforts to agree the deletion of references to LIBOR in their documentation. The wording can be used both as an additional provision in new GMSLAs, or as an amendment to legacy ones.

Source: ISLA Publishes Changes to LIBOR References in the GMSLA.

EBF and EACB respond to the European Commission’s targeted consultation on the designation of a statutory replacement rate for CHF LIBOR

The European Banking Federation (EBF) and the European Association of Co-operative Banks (EACB) have published their joint response to the European Commission’s 23 March 2021 targeted consultation on the designation of a statutory replacement rate for CHF LIBOR. The EBF and the EACB support the general approach proposed by the Commission but make a number of comments, including on the cut-off date of the proposed implementing act, the fixed spread adjustment, consistency across LIBOR tenors and currencies, and scope of financial contracts/instruments.

Source: EACB and EBF comment on the European Commission targeted consultation on the designation of a statutory replacement rate for CHF LIBOR.

ICMA responds to FCA consultation on powers regarding use of critical benchmarks

The International Capital Markets Association (ICMA) has responded to the FCA's consultation (CP 21/15) on the powers regarding the use of critical benchmarks.

Source: ICMA responds to FCA CP 21/15 on use of critical benchmarks.


Wiggin Osborne Fullerlove (a firm) v Bond

[2021] EWHC 1381

This judgment relates to a claim for repayment of an undocument loan. The court considered evidence as to whether an individual was personally liable to repay the funds or whether the proper defendant was a company under their control, concluding that the individual is liable.

Council of EU publishes agreed text of directive on credit servicers and credit purchasers of NPLs

The Council of the EU has published a letter to the chair of the European Parliament’s Committee on Economic and Monetary Affairs (ECON) attaching the text of the directive on credit servicers and credit purchasers that was provisionally agreed by the Council presidency and the Parliament on 28 June 2021. The new directive harmonises rules for credit servicers and credit purchasers of NPLs issued by credit institutions.

Source: Proposal for a Directive of the European Parliament and of the Council on credit servicers and credit purchasers—Letter to the chair of the European Parliament Committee on Economic and Monetary Affairs.

EIB publishes paper on impact of bank loan terms on intangible investment

The European Investment Bank (EIB) has published Working Paper 2021/05 on the impact of bank loans on intangible investment in Europe. The publication uses data from the EIB investment survey to demonstrate that unfavourable interest rates, maturity and collateral requirements have no significant effects on the probability to invest in intangible assets, provided firms are satisfied with their loan size. However, the report notes that the factors do negatively impact the probability to invest in multiple intangible assets, undermining the ability of firms to benefit from the complementarities of these assets. Further, the publication covers the impact of loan conditions on investment intensity and the impact of quantity rationing on the amount invested in intangible assets, which is explained to be minimal.

Source: EIB Working Paper 2021/05 - The impact of bank loan terms on intangible investment in Europe.

LMA, APLMA and LSTA publish revised SLLP and SLLP Guidance

The LMA, in collaboration with the Asia Pacific Loan Market Association (APLMA) and the Loan Syndications and Trading Association (LSTA), has published revised versions of the Sustainability Linked Loan Principles (SLLP) and its associated guidance. The amendments aim to enhance transparency and integrity of the sustainability linked loan product.


HMLR publishes guidance on which signatures are acceptable in which documents

HM Land Registry (HMLR) has published a guidance document which sets out the signatures they accept for different types of document—including forms, deeds, restriction consents and certificates. The table sets out, in each case, whether the Mercury signing process is acceptable and whether electronic signatures, witnessed or otherwise, will be accepted. HMLR confirms that it does not currently accept qualified electronic signatures, but that it is working on being able to accept these signatures as the next stage of its work on electronic signatures.​

Source: Accepted signatures.


Guarantees, indemnities, set-off and variation (Brown-Forman Beverages Europe v Bacardi UK)

[2021] EWHC 1259 (Comm)

This case deals with the distinction between guarantees and indemnities in a complex written agreement. Having decided that certain obligations were guarantees and others indemnities, the case goes on to deal with the effect of a claim of equitable set-off and the extent to which the variation of the underlying agreement can release a guarantor from liability, following the so-called ‘rule in Holme v Brunskill’. The judgment highlights the need for careful drafting of all contractual documentation in group situations and the risks of assuming that consent given by one member of a group of companies can bind other members of the group. It also contains a very useful summary of the various Supreme Court authorities on interpretation of contracts and implied terms. Written by Steven Fennell, barrister at Exchange Chambers in News Analysis: Guarantees, indemnities, set-off and variation (Brown-Forman Beverages Europe v Bacardi UK).

Acquisition finance

CLLS and Law Society publish specimen documents ahead of mergers reform

A Joint Working Party of the Company Law Committees of the City of London Law Society (CLLS) and the Law Society of England and Wales (Law Society) (the Joint Working Party) has published specimen documents to reflect the changes to the City Code on Takeovers and Mergers (Code), which come into effect on Monday 5 July 2021. This follows the Takeover Panel (Panel) confirming in March 2021 that it would be proceeding with amendments to the Code relating to the treatment of offer conditions and the offer timetable. The amended Code applies to all firm offers which are announced on or after 5 July 2021 (implementation date), except where to do so would give the amendments retroactive effect. Any ongoing firm offers which straddle the implementation date, and any offers announced on or after the implementation date which are in competition with such ongoing offers, continue to be subject to the unamended provisions of the Code.

Source: Consultations & Responses.

PMI publishes case study on covenants and protecting recourse

The Pensions Management Institute (PMI) has published a case study on covenants and how to protect recourse in a corporate transaction. The case revolves around a so-called Pension Fund A, and sets out what the situation was, the key risks and the negative impact on the covenant, the action the PMI took, and the key takeaways from the case.

Source: Covenant case study: how to protect your recourse in a corporate transaction.

Aviation finance

BEIS publishes UK ETS Aviation Allocation Table

The Department for Business, Energy & Industrial Strategy (BEIS) has published the UK Emissions Trading Scheme (UK ETS) Aviation Allocation Table in an effort to reduce the risk of carbon leakage. The BEIS has stated that the Aviation Allocation Table ‘contains a list of each aircraft operator’s free allocation for the 2021 to 2025 allocation period’. Further, although the Aviation Allocation Table details the whole 2021–2025 allocation period, 2023–2025 should be ‘treated as indicative pending the outcome of the ongoing free allocation review’.

Source: UK ETS Aviation Allocation Table.

Council of the European Union agrees position on reform of Single European Sky

The Council of the European Union has announced that it has agreed its position on the reform of the Single European Sky. It outlines that the aim of this reform is to improve European airspace management and the air navigation services system to increase capacity, improve cost-efficiency and increase the system’s ability to adapt to traffic variations while also considering reducing the carbon footprint. Minister for Infrastructure and Housing of Portugal, President of the Council, Pedro Nuno Santos, said: ‘Any aviation reform must put safety first. And it is member states who are responsible for the safety of their airspace under the Chicago convention, just like they are responsible for safety, security and defence in general.’

Source: Single European Sky: Council agrees its position on air traffic management reform.

Real estate finance

Business Tenancies (Extension of Protection from Forfeiture etc) (Wales) (Coronavirus) (No 2) Regulations 2021

SI 2021/759: Provisions are made to extend the ‘relevant period’ under section 82 of the Coronavirus Act 2020 regarding re-entry or forfeiture for non-payment of rent in relation to relevant business tenancies until 30 September 2021 and to revoke the Business Tenancies (Extension of Protection from Forfeiture etc) (Wales) (Coronavirus) Regulations 2021. These Regulations came into force on 30 June 2021.

Business Tenancies (Protection from Forfeiture: Relevant Period) (Coronavirus) (England) (No 2) Regulations 2021

SI 2021/732: Provisions are made to prevent landlords of commercial properties from being able to evict tenants due to non-payment of rent until 25 March 2022 in England. This is an extension of the moratorium, which currently will end with 30 June 2021, introduced in response to the coronavirus pandemic. These Regulations came into force on 30 June 2021.

BPF calls for end to moratorium on commercial property evictions

The British Property Federation (BPF) has published data on the moratorium on commercial property evictions, put in place as a result of the coronavirus (COVID-19) pandemic, prior to its expiry on 30 June 2021. The data shows that out of 16,320 retail, hospitality and leisure property leases across the UK, 50% of rent owed since March 2020 has been paid, while agreements, including new payment plans, waivers, and rent holidays and deferrals, have been reached between property owners and tenants on further 27% of rents. Consequently, only 23% of rents owed since March 2020 remain unsolved. However, according to the report, the data also shows that 14% of tenants, who are predominantly well-capitalised businesses who have traded throughout the pandemic, are unwilling to speak to property owners who are open to collaborating and reaching an agreement on owed rent. The BPF therefore urges the government to lift the moratorium, as it says it is merely ‘serving to perpetuate bad behaviour among a small minority of the market, starve small property owners of income and inhibit vital investment in our town centres’.

Source: British Property Federation: Government must lift moratoriums on commercial property owner rights.

Guidance issued on current trends in use of turnover rents in leases

The City of London Law Society’s Land Law Committee has published guidance on the current trends in use of turnover rents in leases. The guidance is aimed at practitioners and includes the types of turnover rent provisions that are being used in pandemic trading conditions, where tenants require rent concessions to 'tide over reduced levels of trading until more normal conditions prevail'. The guidance also includes the attitudes to turnover rent, definition of turnover, rates of basic fixed rents, turnover rent and provisions for reversion to fixed rents, forms of turnover rents arrangements and other relevant factors such as stamp duty land tax requirements and confidentiality. The guidance also details the experiences of Committee members and other solicitors and highlights the current trends in turnover rent drafting that seek to address the issues arising from the coronavirus (COVID-19) pandemic.

Source: Current Trends in use of Turnover Rents in Leases – A guidance note from the City of London Law Society Land Law Committee.

Trade and commodity finance

LIBOR transition for trade finance hub launched

The International Trade and Forfaiting Association (ITFA) and Trade Finance Global Trade have launched the LIBOR transition for trade finance hub to provide resources to the trade finance community on LIBOR transition.

Source: Launched: The ITFA-TFG LIBOR For Trade Finance Hub.

UKEF and ORE Catapult plan to enhance renewable exports

UK Export Finance (UKEF) has announced that it has signed a Memorandum of Understanding with Offshore Renewable Energy (ORE) Catapult, with the aim of promoting trading opportunities for UK offshore wind suppliers. According to UKEF, the UK represents the larger offshore wind market, with installed capacity of 10.4 gigawatts. UKEF and ORE Catapult will raise awareness on the support available to businesses in this sector, including financial support for green SMEs.

Source: UKEF signs flagship green partnership to boost renewable exports.

UK joins OECD Arrangement on Officially Supported Export Credits

UK Export Finance has announced that the UK has joined the Organisation for Economic Co-operation and Development (OECD) Arrangement on Officially Supported Export Credits and the related Aircraft Sector Understanding.

Source: UK confirmed as a Participant to the OECD Arrangement.

Trade credit reinsurance scheme to end

The government and the Association of British Insurers (ABI) have announce that the temporary Trade Credit Reinsurance scheme, brought in to assist companies struggling to obtain trade credit insurance cover due to the coronavirus (COVID-19) pandemic, will close on 30 June 2021, due to the positive outlook for economic recovery in 2021. The trade credit reinsurance scheme directly benefitted over half a million businesses and protected more than £575bn of business turnover by providing around £210bn in insurance cover.

Sources: Update on the Trade Credit Reinsurance scheme and Joint statement on the closure of the Trade Credit Reinsurance scheme.

Sustainable finance

IFRS advocates for a global baseline for sustainability-related disclosure

The International Financial Reporting Standards Foundation (IFRS) has published a speech by the Chair of the IFRS Foundation Trustees, Erkki Liikanen. Liikanen states that there is a path to global sustainability if a global baseline for sustainability-related disclosure to compare investment decision-making is established, and jurisdictions follow the global baseline with their own initiatives. According to the IFRS, this baseline has been welcomed by G7 Finance Ministers, global regulators, investors and other standard-setting organisations.

Source: Is there a path to global sustainability standards?

EBA publishes report on ESG risk management and supervision

The European Banking Authority (EBA) has published a report on the management and supervision of ESG risks. The report provides institutions with common definitions of ESG risks and their transmission channels and identifies evaluation methods that are needed for effective risk management. The EBA recommends integrating ESG risks into business strategies, governance and risk management as well as supervision in a timely manner.

For more information on recent news on sustainable finance, see Practice Note: Sustainable finance—recent news.

FCA consults on climate-related disclosure rules for listed companies and certain regulated firms

The FCA has published two consultation papers, CP21/18 on extending climate-related disclosure requirements to standard listed companies and CP21/17 on enhancing climate-related disclosures by asset managers, life insurers and FCA-regulated pension providers. The proposals follow the introduction of climate-related disclosure requirements for premium listed companies in December 2020 which are aligned with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD). Both consultations close on 10 September 2021.

Source: FCA consults on further climate-related disclosure rules.

GFMA publishes global principles for developing climate finance taxonomies

The Global Financial Markets Association (GFMA) has published a set of ‘global, actionable’ principles for officials and the private sector to consider when developing regional and sector-specific climate finance taxonomies. The GFMA says that, collectively, all market participants must strive towards the development of consistent, comparable and reliable taxonomies to enable capital markets financing to be mobilised at the scale and pace necessary for an effective sustainable finance transition.

Source: Wholesale markets banks and BCG develop first global principles for climate finance taxonomies—A key enabler for transition finance success.

Government responds to Dasgupta Review

HM Treasury has published the government’s response to the Dasgupta Review on the economics of biodiversity. HM Treasury’s report sets out how the government will ‘go further’ in response to many of the Dasgupta Review’s conclusions. The report lays out government policies made in relation to, and responding to, the Review.

Sources: The Economics of Biodiversity: The Dasgupta Review—Government Response and Government commits to ‘nature-positive’ future in response to Dasgupta review.

BoE publishes Climate Biennial Exploratory Scenario to explore financial risks from climate change

The Bank of England has published its Climate Biennial Exploratory Scenario (CBES) for 2021, which will explore the financial risks posed by climate change for the largest UK banks and insurers. The CBES will use three scenarios—early, late and no additional action—to explore the two key risks from climate change: the risks arising from the significant structural changes to the economy needed to achieve net zero emissions (transition risk), and risks associated with higher global temperatures (physical risks).

Sources: Bank of England publishes the key elements of the 2021 Biennial Exploratory Scenario: Financial risks from climate change and UK Finance response to the Bank of England's publication of the Climate Biennial Exploratory Scenario.

Commission publishes draft Delegated Regulation supplementing the EU Taxonomy Regulation and supporting documents

The European Commission has published a draft Delegated Regulation supplementing the EU Taxonomy Regulation (Regulation (EU) 2020/852) by establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as contributing substantially to climate change mitigation or climate change adaptation and for determining whether that economic activity causes no significant harm to any of the other environmental objectives. The Commission has also published a number of documents which support the draft delegated regulation.

Source: Commission Delegated Regulation (EU) …/... supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council by establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as contributing substantially to climate change mitigation or climate change adaptation and for determining whether that economic activity causes no significant harm to any of the other environmental objectives.

LMA, LSTA and ELFA publishes their first ESG Dilligence Questionnaire

The LMA, the Loan Syndications and Trading Association (LSTA) and the Equipment Leasing and Finance Association (ELFA) have published a new ESG Dilligence Questionnaire aimed at asset managers, to share with investors. The questionnaire investigates how varied and regularly duplicative ESG information requests should be streamlined. The bodies hope that ‘by having a Questionnaire that is developed based on the most common of those information requests this document can offer an “industry standard” which can be broadly accepted’.

Source: New ESG Diligence Questionnaire Published Today.

NGFS publishes second set of Climate Scenarios for central banks and supervisors

The NGFS has published a second set of climate scenarios and a dedicated website, both aimed at fostering the integration of climate-related risks into the work of central banks and supervisors, and beyond. The scenarios have been brought up to date, including by incorporating countries’ commitments to reach net-zero emissions, and have an expanded set of macroeconomic variables and additional country and sector-level granularity. The new website serves as a portal to the NGFS scenarios and directs users to all related NGFS publications and data.

Source: NGFS publishes the second vintage of climate scenarios for forward looking climate risks assessment.

Green Technical Advisory Group to oversee creation of Green Taxonomy

HM Treasury has announced that an independent expert group, the Green Technical Advisory Group (GTAG), has been appointed to advise government on standards for green investment, and will oversee the creation of a Green Taxonomy. The Green Taxonomy will define what economic activities can be counted as environmentally sustainable, and is therefore designed to combat so-called ‘greenwashing’ (unsubstantiated or exaggerated claims that an investment is environmentally friendly) and allow firms to better understand how they are affecting the environment. GTAG will be chaired by the Green Finance Institute, and include financial and business stakeholders, taxonomy and data experts, and subject matter experts drawn from academia, NGOs, the Environment Agency and the Committee on Climate Change.

Sources: Independent expert group appointed to advise Government on standards for green investment and New independent group to help tackle ‘greenwashing’.

BIS publishes executive summary of NGFS climate risk and prudential supervision guide

The Bank for International Settlements (BIS) has published an executive summary of the Network for Greening the Financial System (NGFS)’s ‘Guide for Supervisors—Integrating climate-related and environmental risks into prudential supervision’. It summarises the guide’s five recommendations for integrating climate-related and environmental risks in supervisory frameworks.

Source: Climate and environmental risks—Guide for supervisors—Executive summary.

IRSG sets out recommendations for reviewing EU taxonomy for UK application

The International Regulatory Strategy Group (IRSG) has published its recommendations for reviewing the EU taxonomy for UK application. In its paper, the IRSG endorses the approach of the government in staying aligned to the EU taxonomy in the short term, although it also recognises some limitations of the EU approach. It urges the government ‘to accelerate progress on this with a view to providing significant clarity to UK issuers and financial market participants in advance of COP26’.

Source: IRSG Recommendations for reviewing the EU Taxonomy for UK application.

UNEP FI and PRI launch Investment Leadership Programme for responsible investment

The UN Environment Programme Finance Initiative (UNEP FI) and the Principles for Responsible Investment (PRI) have jointly launched the Investment Leadership Programme (ILP), designed to accelerate leadership in responsible investment. The ILP will bring together responsible investors to collaborate on ‘initiatives that are considered ambitious, but not yet ready for mainstream investment adoption’, endeavouring to bring these initiatives to a point where they can subsequently be taken forward by the wider investment community.

Source: UNEP FI and PRI launch new joint programme to boost leadership in responsible investing.

EIB Group becomes signatory to CDP and joins environmental disclosure system

The European Investment Fund (EIF) has announced that the European Investment Bank Group (EIB Group), which comprises the European Investment Bank and the EIF, has become an investor signatory to CDP, which is a non-profit organisation that runs the environmental disclosure system. As an investor signatory, the EIB Group joins a group of 590 financial institutions, with US$ 110trn in assets, requesting disclosure using CDP’s climate change, forests and/or water security questionnaires that are fully aligned with the recommendations issued by the Task Force on Climate-related Financial Disclosures (TCFD). CDP’s annual disclosure request is sent out to more than 7,000 companies globally.

Source: CDP welcomes the European Investment Bank Group as an investor signatory.

Debt capital markets

IA urges market participants to increase efforts to meet LIBOR-linked bond transition deadline

The Investment Association (IA) has published a document, ‘Encouraging transition of LIBOR-linked bonds’, in which it and its members emphasise the need to address the large number of outstanding LIBOR-linked bonds that have not yet transitioned to a new rate despite the rapidly approaching deadline in six months’ time.

Source: IA: Investors say collective efforts must be intensified as final stage of LIBOR-linked bond transition approaches.

ICMA AMIC publishes response to FCA consultation on UK MiFID research and best execution (CP21/9)

The International Capital Market Association’s Asset Management and Investors Council (ICMA AMIC) has responded to the FCA’s 28 April 2021 consultation paper CP21/9 on UK MiFID research and best execution. ICMA welcomes an exemption for fixed-income, currencies and commodities (FICC) research from unbundling rules as well as the proposal to remove the RTS 27 and RTS 28 best execution reports.

Source: ICMA AMIC responds to FCA consultation on UK MiFID research and best execution.

ICMA publishes updated Green & Social Bond Principles 2021 

ICMA has announced that the 2021 edition of the Green and Social Bond Principles has been published. This is the first update since the 2018 publication, which has been translated into 24 languages and, ICMA says, ‘has been at the centre of developments in the market as it has gone mainstream’.

Source: Green & Social Bond Principles 2021 edition issued.

Council of the EU approves its approach to regulation on assignments of claims

The Council of the European Union has approved its general approach on the proposal for a regulation on the law applicable to the third-party effects of assignments of claims. The draft regulation, which is part of the capital markets union, aims to ensure greater legal certainty for businesses and citizens when it comes to cross-border transfers of claims, thereby facilitating access to finance and promoting cross-border investment in the EU.

Source: Assignments of claims: Council approves mandate for negotiations.


Supreme Court reformulates scope of duty approach to negligent advice (Manchester Building Society v Grant Thornton UK LLP)

The Supreme Court in (Manchester Building Society v Grant Thornton [2021] UKSC 20, has restated the principles to be considered when determining whether a loss falls within the scope of an adviser’s duty of care, ruling that losses resulting from negligent accounting advice could be recovered in this case due to the purpose of the advisor’s duty. It found that the distinction between ‘advice’ and ‘information’ should not be a rigid test and that the counterfactual analysis approach that had previously been taken should not supplant or subsume the approach put forth in the present case.

FIA responds to carbon markets consultation

The Futures Industry Association (FIA) has sent in its recommendations to the Taskforce on Scaling Voluntary Carbon Markets (TSVCM) Phase II Public Consultation Report. The comments focus on the governance body proposals set out in the consultation relating to the legality, certainty, and regulatory oversight of carbon contracts. FIA believes that the futures, options and derivatives markets will play a vital role in helping the economy weather the storm of these risks, as they have ‘a strong track record of success’ and ‘have proven to be both agile and responsible platforms for innovation’. FIA has also announced its support for proposals to align the way in which global regulators review how they approach voluntary carbon credits, and has welcomed TSVCM efforts to promote standardised contracts.

Source: FIA submits recommendation to the Taskforce on Scaling Voluntary Carbon Markets consultation.

ISDA developments

ISDA publishes guidance on key changes in the 2021 ISDA Interest Rate Derivatives Definitions

The International Swaps and Derivatives Association (ISDA) has published guidance on the key changes made in the 2021 ISDA Interest Rate Derivatives Definitions (2021 Definitions), which ISDA published on 11 June 2021. The 2021 Definitions update the 2006 ISDA Interest Rate Derivatives Definitions (2006 Definitions) and consolidate the more than 75 supplements that have been added in the 15 years since their publication. They will be implemented as the market standard definitional book for interest rate derivatives on 4 October 2021.

Source: Key changes in the 2021 ISDA Interest Rate Derivatives Definitions.

ISDA consults on fallbacks for ICE swap rates

ISDA has launched a new consultation on how to implement fallbacks for certain swap rates published by ICE Benchmark Administration (IBA). The IBA publishes the GBP LIBOR ICE Swap Rate and the USD LIBOR ICE Swap Rate (ISRs) which are designed to represent the mid-price for the fixed leg of a fixed-for-floating swap transaction where the floating leg references a specified rate (such as GBP LIBOR or USD LIBOR), or swap spreads (the applicable mid-price minus a corresponding specified government bond yield) for a set of tenors at a specified time of the day. The ISRs are published using a waterfall methodology of inputs and are dependent on quoted prices and volumes for interest rate swaps referencing the relevant rate.

Source: ISDA launches consultation on fallbacks for GBP LIBOR ICE Swap Rate, and USD LIBOR ICE Swap Rate.

ISDA and AFME respond to EBA’s consultation on draft RTS on gross JTD amounts

ISDA and the Association for Financial Markets in Europe (AFME) have published their joint response to the EBA’s consultation on draft regulatory technical standards (RTS) on gross jump-to-default (JTD) amounts in the default risk charge component of the Fundamental Review of the Trading Book (FRTB) standardised approach. In the response, ISDA and AFME express their concern regarding ‘certain elements in the Basel III reforms and the significant impact the package will have on capital requirements for specific product and risk categories’ as they believe the implementation of the FRTB will ‘materially increase capital requirements for banks with market making activities in the EU’. As such, ISDA and AFME remind the EBA that the standardised approach is a ‘key element’ of the FRTB. They also suggest that there is a ‘lack of clarity around the treatment of equity and credit indices’ in the draft RTS and recommend that alternatives to the look-through approach in the default risk charge are introduced for equity and credit indices.

Source: ISDA and AFME Respond to EBA on JTD Amounts.

ISDA and AFME submit joint response to EBA consultation on RRAO

ISDA and AFME have jointly responded to the EBA consultation on draft regulatory technical standards on the residual risk add-on (RRAO) in the Fundamental Review of the Trading Book. The response welcomes the efforts taken by the EBA to develop regulatory standards for the identification of instruments that are vulnerable to residual risks, highlighting the importance of defining the scope of instruments and considering the appropriate level of the incremental capital charge.

Source: ISDA and AFME Respond to EBA on FRTB Residual Risk Add-On.

ISDA launches new library platform to facilitate access to documents

ISDA has announced the launch of the MyLibrary Digital Documentation Platform, a new digital tool to facilitate the access and navigation of ISDA documents. Both the updated 2021 ISDA Interest Rate Derivatives Definitions and the 2002 ISDA Master Agreement are to be made available initially, with other documentation to follow in time. The launch forms part of ISDA’s strategy to improve the automation of its services in order to increase efficiency within derivatives markets. The new platform includes comparison tools allowing users to see previous versions of updated documents, a navigation and search function with the capacity to perform complex searches, and bookmarks for users to personalise for ease of access to particular documents and topics.

Source: ISDA Launches MyLibrary Digital Documentation Platform.

ISDA and AFME respond to European Commission consultation on taxonomy disclosures

ISDA and AFME have submitted a response to a European Commission consultation on the Delegated Act on Article 8 taxonomy disclosures.

Source: ISDA responds to EC consultation on taxonomy disclosures.

FIA and ISDA respond to consultation on expanded resolution regime for UK CCPs

FIA and ISDA have responded to HM Treasury’s consultation on proposals for an expanded resolution regime for UK central counterparties (CCPs). According to ISDA, the proposals are closely aligned with the EU’s CCP recovery & resolution framework and mostly in accordance with international guidelines, as a result of the UK’s active participation in and contributions to those initiatives.

Source: FIA and ISDA Respond to HM Treasury’s Consultation on CCP Resolution.

ISDA responds to ROC consultation on revised CDE Technical Guidance

ISDA has responded to the consultation launched by the Regulatory Oversight Committee (ROC) as the International Governance Body (IGB) of the Unique Transaction Identifier (UTI), Unique Product Identifier (UPI), and Critical Data Elements (CDE) on the revised CDE Technical Guidance. ISDA agrees or does not comment on the majority of points. However, it raises concerns in relation to paragraph 2.7 concerning CDE related to Counterparty 2 and valuation amount at 2.25 of the consultation document.

Source: ISDA: Re: Harmonisation of critical OTC derivatives data elements (other than UTI and UPI) Revised CDE Technical Guidance—Consultative Document.

CCP12 and others publish report to address CPMI/IOSCO category 1 topics

CCP12, the European Association of CCP Clearing Houses, the FIA and ISDA have published a report addressing the Committee on Payments and Market Infrastructures (CPMI) and the Board of the International Organisation of Securities Commissions (IOSCO), highlighting category 1 issues involving the design and conduct of default management auctions and how the CPP12 should aim to enhance auction practices and procedures. The report outlines the standardisation of operational topics, such as common terminology, methods of communication, the process for determining whether an auction is the appropriate liquidation method, overall ‘current practices across the industry, as well as responses to a 2019 CPMI-IOSCO discussion paper’.

Source: CCP Default Auctions Best Practices Category 1 Issues: Terminology and Operational Aspect.

Securitisation and structured products

ESMA registers first two securitisation repositories under the EU Securitisation Regulation

ESMA has approved the registrations of the first two securitisation repositories (SRs) under the EU Securitisation Regulation. The registration decisions for European DataWarehouse GmbH based in Germany, and SecRep B.V. based in the Netherlands will become effective on 30 June 2021.

Source: ESMA registers European DataWarehouse GMBH and SecRep B.V. as securitisation repositories.

HM Treasury calls for evidence on review of UK Securitisation Regulation

HM Treasury has published Review of the Securitisation Regulation: Call for evidence, to inform the UK government’s review of Retained Regulation (EU) 2017/2402 (UK Securitisation Regulation). Article 46 of the UK Securitisation Regulation requires HM Treasury to review the functioning of the UK Securitisation Regulation and lay a report in Parliament by 1 January 2022. Responses should be submitted by 2 September 2021.

Source: Review of UK Securitisation Regulation: Call for evidence.

AFME responds to consultation on reform of taxation of securitisation companies

AFME has published a response to HM Treasury’s and HM Revenue & Customs’ consultation on the reform of taxation of securitisation companies. AFME explains that it shares the goals of the consultation and is reassured by the intention to ensure the UK’s tax code maintains pace with the evolving nature of the capital markets and contributes to keeping the UK’s role as a leading financial services centre. AFME also stresses that changes to the regime must be ‘carefully thought through’ to avoid disruption to the market and notes that ‘predictability and stability have been arrived at through an iterative process’.

Source: UK consultation on the reform of the Taxation of Securitisation companies.

Regulation for derivatives and structured products

Delegated Regulation extending clearing exemption for pension schemes published in Official Journal

Commission Delegated Regulation (EU) 2021/962 has been published in the Official Journal of the EU, extending the temporary clearing exemption for pension scheme arrangements in Article 89(1) of Regulation (EU) 648/2012 (EU EMIR) by one year until 18 June 2022.

ESMA issues statement on implementation of FRANDT terms for clearing services

The European Securities and Markets Authority (ESMA) has issued a public statement on the challenges that certain clearing members and clients were facing whilst preparing for the 18 June 2021 deadline to provide clearing services in accordance with fair, reasonable, non-discriminatory and transparent (FRANDT) commercial terms under the European Market Infrastructure Regulation (EU) 648/2012 (EU EMIR).

Source: ESMA public statement on the implementation of the FRANDT commercial terms to provide clearing services.

EACH response to HMT consultation on the expanded CCP resolution regime

The European Association of CCP Clearing Houses (EACH) has provided detailed feedback to the HM Treasury (HMT) consultation paper Expanded resolution regime: Central counterparties, published by HMT on 12 February 2021.

Source: EACH response document.

ESMA consults on technical standards on the EU Securitisation Regulation

ESMA is consulting on draft regulatory technical standards (RTS) relating to the Securitisation Regulation (EU) 2017/2402 (EU SECR), as amended by Regulation (EU) 2021/557 (Amending EU SECR). The RTS specify the content and format of the standardised templates for simple, transparent and standardised (STS) notification of on-balance sheet (synthetic) securitisations. ESMA has also published interim STS templates for synthetic securitisations and notes that these may be used on a voluntary basis until the RTS become applicable. The consultation closes on 20 August 2021.

Source: ESMA consults on synthetic securitisations RTS and amendments to STS templates.


Coronavirus—temporary Insolvency Practice Direction further extended

​The Parliamentary Under Secretary of State at the Ministry of Justice, Lord Wolfson, has approved and signed a temporary Insolvency Practice Direction (TIPD) on behalf of the Lord Chancellor. The TIPD replaces and extends the previous TIPD and comes into force on 30 June​ 2021. T​​here is no change to the procedures that are currently being followed for insolvency hearings or ​​​for the provisions in relation to administration appointments and statutory declarations. The measures in the TIPD are designed to assist court users during the continuing coronavirus pandemic.

Source: Extended temporary Insolvency Practice Direction – approved and signed by Lord Wolfson.

Hurricane Energy plan—sanction refused

[2021] EWHC 1759 (Ch)

The court refused to sanction a Part 26A restructuring plan for Hurricane Energy. News Analysis: Hurricane Energy plan—sanction refused, looks at whether Condition A (the no worse off test) requirement for cross class cram down (CCCD) under a Part 26A restructuring plan (or Part 26A plan or Part 26A scheme) was satisfied.

For a more in depth look at the reasons given by Mr Justice Zacaroli for refusing to sanction the Part 26A plan for Hurricane Energy, see News Analysis: Hurricane Energy—for the first time, the English court declines to approve a restructuring plan (Re Hurricane Energy plc), written by Kate Stephenson and Zoe Stembridge of Kirkland & Ellis International LLP.

Insolvency Service announces extension to temporary insolvency measures amid coronavirus (COVID-19)

The Insolvency Service has announced that certain temporary measures which had been introduced to offer extra support during the coronavirus pandemic will be extended. Restrictions on statutory demands and winding up petitions will be extended until 30 September 2021. They had been due to expire on 30 June 2021. Restrictions on business evictions using Commercial Rent Arrears Recovery will also be extended from 30 June 2021 to 25 March 2022.

Source: Government extends business support measures.

Regulation for banking lawyers

SRB publishes notification policy for when bail-in recognition clauses cannot be added to contracts under third-country law

The Single Resolution Board (SRB) has published its policy on how banks can notify the authorities when bail-in recognition clauses cannot be added to contracts under third-country law. The guidance explains how the SRB will apply, in practice, the rules set out in Article 55(2) of the Bank Recovery and Resolution Directive 2014/59/EU (EU BRRD), further detailed in the forthcoming delegated and implementing regulations based on the applicable regulatory and implementing technical standards.

Source: Notification of impracticability to include bail-in recognition clauses in contracts: SRB approach and expectations.

Commission welcomes political agreement on NPL legislation

The European Commission has issued a statement under the heading ‘Non-Performing Loans (NPLs): Co-legislators agree on new rules in order to improve market transparency’, in which the Commission welcomes the political agreement between the European Parliament and the Council on the proposal for a Directive on credit servicers and credit purchasers.

Source: Non-performing loans (NPLs): Co-legislators agree on new rules in order to improve market transparency.

European Commission consults on ways to improve secondary markets for NPLs

The European Commission has launched a targeted consultation on improving transparency and efficiency in secondary markets for non-performing loans (NPLs). The Commission is considering possible changes to banks’ Pillar 3 disclosure requirements under Regulation (EU) 575/2013 (EU CRR) as well as setting up a central data hub at EU level to act as a data repository underpinning the NPL market. The deadline for comments is 8 September 2021.

Source: Targeted consultation on improving transparency and efficiency in secondary markets for non-performing loans (NPLs).
















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