Brexit—documentation issues for lenders and hedge providers STOP PRESS: On 23 June 2016, the UK held a referendum on its membership of the EU, with a majority voting in favour of the UK leaving the EU. This Practice Note was written ahead of that date to provide an overview of the types of provisions in finance documentation which could be impacted by a vote to leave. The information in it remains relevant, notwithstanding that the result of the referendum was not known at the time it was written. For additional information on how the result of the referendum may impact the finance and financial services industries, see Practice Note: The vote for Brexit—issues for finance documentation. This Practice Note explains how a Brexit will or could impact on facility agreements and loan-linked hedging agreements. In respect of the latter, it confines itself to swap documentation that is used to document vanilla interest rate and currency hedges for loan transactions. A UK vote for a Brexit would amount to a major change to the UK legal landscape, and it is likely that holding legislation will be required in the UK to preserve the continuing operation of much European Union (EU) derived law for some (perhaps a considerable) period of time. Notwithstanding that conclusion, the possible impact of a Brexit is outlined below. Background to Brexit With the referendum on UK membership
Interest rate swap (IRS) structure diagram Step-by-step guide • Party A and Party B enter into an International Swaps and Derivatives Association (ISDA) Master Agreement, Schedule and confirm with each other that they will document their interest rate swap (IRS). • Assume the notional amount of the IRS is US$ 100,000,000. • Assume that payment is due quarterly (it could be annually, quarterly, monthly or any other such date as the parties
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How do I know if my guarantee is a qualifying guarantee under the ISDA 2014 credit derivative definitions? What is a qualifying guarantee? A qualifying guarantee is an instrument that constitutes a guarantee of a reference entity under the 2014 ISDA Credit Derivatives Definitions (the 2014 Definitions). If certain conditions are met, a qualifying guarantee will constitute: • an 'Obligation' under Section 3.1 of the 2014 Definitions so that a credit event can be triggered, and • a 'Deliverable Obligation' under Section 3.2 meaning that the credit derivative can be settled How do I check if my guarantee is a qualifying guarantee? In order for a guarantee to be an 'Obligation' capable of triggering a credit event or considered a valid 'Deliverable Obligation' in terms of settling a credit derivative transaction, it must be a 'Qualifying Guarantee'. This term is defined in Section 3.21 of the 2014 ISDA Credit Derivative Definitions. A Qualifying Guarantee means: • a written
What is an ISDA protocol? What is an ISDA protocol? The International Swaps and Derivatives Association Inc. (ISDA) publish protocols from time to time. Protocols are a means of amending ISDA's standard form documents in a quick and practical way. The amendments suggested by ISDA in the protocols can be incorporated into parties' existing documents by those parties agreeing, or 'adhering', to that protocol. By adhering to a protocol, it means that a party can amend a large number of documents with a large number of counterparties in one go. For each protocol, ISDA will publish text to document the changes that have been agreed with the relevant ISDA working group and also an adherence letter. Both ISDA members and non-ISDA members can then send executed copies of the adherence letter to ISDA who collate a list of the parties who have agreed to be bound by the protocol. This means that if both you and your counterparty agree to be bound by the protocol, all the documents affected by the changes set out in the protocol will be amended automatically on the terms of the protocol. On the ISDA protocol management page, ISDA will publish: • full text of the protocol • list of adhering parties, and • frequently asked questions Once the protocol has been signed, no further amendment or negotiation needs to be done by the adhering parties
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Welcome to the weekly Financial Services highlights from the Financial Services team for the week ending 11 August 2022. This week’s edition of Financial Services highlights provides an aggregation of the news reported by the Lexis®PSL Financial Services team over the past week and includes: (1) news items relating to the conflict in Ukraine, (2) news items relating to Brexit, (3) updates from UK regulators, (4) updates from EU and international regulators, (5) updates from industry bodies and market participants, (6) new and updated content and (7) dates for your diary from Financial Services.
This week's edition of Banking and Finance weekly highlights includes: (1) Companies House publishes letter to overseas entities who own or lease property in the UK, (2) BEIS issues order under National Security and Investment Act 2021, and (3) Cross-Parliamentary Group announces UK crypto regulation inquiry.
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