Regulatory

BAFT Updates English Law and New York Law Master Participation Agreements (MPAs) with LIBOR Amendments

With the cessation of LIBOR and the transition to alternative reference rates, BAFT has prepared amendment agreements to the English Law and New York Law Master Participation Agreements (MPAs).

WASHINGTON — As the trade finance industry prepares for the cessation of LIBOR and the transition to alternative reference rates, BAFT together with ITFA and Sullivan & Worcester have prepared amendment agreements to the 2008 (English Law), 2010 (New York Law), 2018 (English Law) and 2019 (New York Law) Master Participation Agreements (MPAs). Access the new amendment agreements here.

“The suite of MPAs are industry standard documents that are used by banks and their counterparties around the globe to facilitate the buying and selling of country and bank trade-related assets.” said Tod Burwell, President & CEO of BAFT, “Updating the widely used MPAs is an important element for trade finance to swiftly transition to alternative reference rates.”

“The LIBOR transition touches multiple areas of trade finance not least distribution. Producing a simple and commercially rational solution for one of the most widely used documents in distribution, the MPA, was therefore crucial. I am therefore very pleased that the two associations, BAFT and ITFA, working with law firm Sullivan & Worcester were able to produce this timely document.” said Sean Edwards, Chairman of ITFA.

The amendment agreements can be used to make the changes to existing MPAs as well as for new agreements. The approach taken is to replace the references to LIBOR by references to relevant central bank rates for those currencies for which LIBOR is currently quoted. The changes only deal with LIBOR replacement and not with any other issues or developments since each MPA was published e.g. bail-in.

Geoffrey Wynne, Partner & Head of Trade and Export Finance Group at Sullivan & Worcester said, “With the direction of those involved at BAFT and ITFA we have provided a pragmatic solution covering how to change all the existing BAFT MPAs where new ones are entered into, and Amendment Agreements to amend the existing ones where they are continuing. We hope market participants will find these useful.”

It is important to note that the amendment agreements do not amend the rate in any participated transactions and only in the MPA itself. Participated transactions can use a variety of rates, as specified in an offer. For those wishing to enter into fresh agreements reflecting the changes and for new MPAs in the future, updated versions of the various BAFT MPAs are available for members and non-members here.

BAFT Media Contact:
Blair Bernstein
Director, Public Relations
[email protected]
+ 1 (202) 663-5468

BAFT, Trade Finance Groups Launch Report on Impact of LIBOR Transition

New report provides insight on the impact of LIBOR transition for banks and corporations in the trade finance industry.

WASHINGTON — BAFT, the leading global financial services association for international transaction banking, in collaboration with TXF Intelligence and Baker McKenzie today announced the publication of No More LIBOR: What Next for Trade Finance? This report explores the impending impact the cessation of LIBOR will have on trade finance. Using a mixed methodology that combined quantitative survey responses with detailed qualitative insights from banks and corporations between February and May 2021, this report sheds light on the industry’s transition priorities in the months leading up to LIBOR’s cessation.

“The goal of this research is to present the latest market trends surrounding the impending cessation of LIBOR across trade finance,” said Tom Parkman, head of research, TXF Intelligence. “The data presented provides an insight into prevailing sentiments across parts the banking and corporate world this critically important issue – research which to date, does not exist in the trade finance industry.”

The transition away from LIBOR will have a deep impact across the suite of trade finance products. In 2019, global trade flows totaled $18.1 trillion, with an estimated $9.77 trillion of that sum comprised of bank intermediated trade. Corporations surveyed in this research have reportedly made very little progress to successfully transition all of their LIBOR-linked exposures to a suitable alternative rate. Banks surveyed continue to stress the importance of transitioning to term rates for all currencies, but especially for U.S. Dollar. Banks cited the uncertainty and lack of clarity around the availability of term rates across currencies as a roadblock to effectively communicating a transition plan with corporate clients. Regulatory efforts are being made in the U.S. to assist the availability of the Term SOFR rate and more progress is expected soon. For example, on July 21, the Alternative Reference Rates Committee recommended conventions and use cases for employing the forward-looking Secured Overnight Financing Rate (SOFR) term rates that are expected to be formally recommended by the ARRC in the coming days.

“While LIBOR transition has often been regarded as a ’bank problem,’ banks tread a fine line between educating borrowers who may be less familiar with the issues around LIBOR transition and providing advice,” said Luka Lightfoot, partner, banking and finance, Baker McKenzie. “It is important that corporates and banks engage with each other to come to mutually acceptable solutions to the LIBOR transition challenge.”

“Banks should continue to track currency-specific transition deadlines, intensify internal system and process preparations, and enhance and tailor communication with corporate clients,” said Diana Rodriguez, vice president, international policy, BAFT. “Taken together, these steps will help to ease some of the uncertainty and pave a more solid path toward transition.”

To read No More LIBOR What Next for Trade Finance?, click here.

To read BAFT’s other resources on navigating the transition, click here.

BAFT Media Contact:
Blair Bernstein
Director, Public Relations
[email protected]
+ 1 (202) 663-5468

BAFT Releases FAQ on LIBOR Transition, Impact to Trade Finance

New report provides guidance and information on LIBOR transition for trade finance industry

WASHINGTON — BAFT, the leading global financial services association for international transaction banking, today announced the publication of the first edition of LIBOR Transition: Impact on Trade Finance – Frequently Asked Questions Guide to inform and respond to frequently asked questions related to LIBOR transition for U.S. Dollar and UK Pound Sterling.

Trade is essential to GDP growth and supports commercial flows and supply chain sustainability globally. In 2019, global trade flows totaled $18.1 trillion, with an estimated $9.77 trillion of that sum comprised of bank intermediated trade. USD LIBOR is the most widely used benchmark across the trade finance industry globally. As the market prepares to transition away from LIBOR to Risk Free Rates (RFRs) by the end of 2021, BAFT member institutions have been working steadily to prepare for the change.

“This frequently asked questions guide provides timely information for trade finance practitioners who are preparing for the transition away from LIBOR,” said Diana Rodriguez, vice president, international policy at BAFT. “The trade finance business has long stressed the imperative for a forward-looking term rate to ensure the uninterrupted provision of financing to support cross border trade. We were pleased to see the development of Term SONIA in the UK which forged a clear path for the industry to transition. In the U.S., we are awaiting and closely tracking the ARRC’s plans to formally endorse a SOFR Term Rate and are evaluating the viability of other term rates solutions for the U.S. Dollar.”

The BAFT guide is the culmination of several months of analysis by the BAFT IBOR Transition Working Group, as well as active engagement with vendors providing term rate solutions for the U.S. Dollar. Trade finance practitioners are encouraged to work internally with LIBOR transition teams to review documentation carefully to determine what elements of the portfolio and services reference LIBOR or other IBORs that will cease and what fallbacks would apply when the rate becomes unavailable. This resource will be updated regularly as new official sector guidance emerges and to reflect emerging BAFT working group best practices. Future iterations of this guide will consider transition priorities for other important currencies for the trade finance business.

To read the LIBOR Transition: Impact on Trade Finance – Frequently Asked Questions Guide, click here.

Read the full guide here.

BAFT Media Contact:
Blair Bernstein
Director, Public Relations
[email protected]
+ 1 (202) 663-5468

BAFT Releases SOFR: Trade Finance Priorities White Paper at 2020 International Convention

New report examines the implications of transitioning away from LIBOR to SOFR for the trade finance industry.

WASHINGTON — BAFT, the leading global financial services association for international transaction banking, today announced the publication of SOFR: Trade Finance Priorities to inform the policy community and the industry on the impact of a possible transition to the Secured Overnight Financing Rate (SOFR) from the London Inter-Bank Offered Rate (LIBOR).

“This report examines the impact of the transition from LIBOR on the trade finance business and concludes there is an imperative for a forward-looking term rate to ensure the uninterrupted provision of financing to support cross border trade,” said Diana Rodriguez, vice president, international policy at BAFT. “We were pleased to see the Alternative Reference Rate Committee’s (ARRC) September publication of a Request for Proposals for a Term Rate administrator, and we welcomed subsequent dialogue with the Federal Reserve Board on the findings of this paper. We look forward to continued progress toward the publication of a forward-looking term SOFR in the first half of 2021 for use by the Trade Finance market.”

The white paper is the culmination of several months of analysis by the BAFT IBOR Transition Working Group’s Suitability of Rates subgroup, as well as input from a global BAFT member survey. The working group also considered findings from the BAFT Future Leaders’ Group on IBOR Transition and incorporated elements of their work in this paper. Though members have made progress in identifying areas where overnight SOFR could be used, BAFT believes most transactions require a forward-looking rate to provide certainty to trade buyers and sellers.

“As experienced trade finance professionals, the working group members have provided market views stressing the critical importance of a forward-looking term rate from a trade finance practitioners perspective,” stated Priyamvada Singh, managing director & regional head, product, propositions & structuring, global trade and receivables finance, HSBC Bank USA. “Considering trade finance products are globally used to finance a significant volume of merchandise trade, and that users of trade finance products globally span a wide range of companies, especially a majority of Small and Medium companies (SMEs), the members recognize the need for industry consensus for a workable solution that can provide cost certainty and pricing transparency for robust adoption.”

“Establishment of a SOFR term rate and clarity on the timing of its launch are critical for the trade market to finalize conventions and support the transition away from LIBOR,” said Doug Laurie, director, global programme lead- LIBOR transition loans at Barclays. “Getting the SOFR transition right will have an impact on banks and their customers globally given the dominance of the U.S. dollar for trade transactions.”

Rodriguez of BAFT and Laurie of Barclays will host a workshop on the implications of the transition to SOFR for trade finance on Friday, Nov. 20, 2020 at 8:00 a.m. ET during BAFT’s International Convention.

To read the full white paper, visit our Library of Documents under the BAFT Guidance and Industry Practice section or click here.

About BAFT
BAFT is the leading international financial services association whose membership includes large global and regional banks, service providers, and fintech companies headquartered around the world. BAFT provides advocacy, thought leadership, education, and a global forum for its members in transaction banking, including international trade finance and payments. For nearly a century, BAFT has expanded markets, shaped policy, developed business solutions, and preserved the safety and soundness of the global financial system.

BAFT Media Contact:
Blair Bernstein
[email protected]
+ 1 (202) 663-5468

UK and US Finance Industries Join Forces to Propose a Vision for Closer Regulatory Cooperation

Leading representatives from the UK and US financial and related professional services industries have joined together to propose a united business vision for future UK-US regulatory cooperation and dialogue. The group’s proposals aim to help forge even closer links between the hosts of the world’s two foremost financial centers.

The paper is released on the same day that the group relaunches as the British American Finance Alliance (BAFA). BAFA’s recommendations seek to build on the success of the UK/U.S. Financial Regulatory Working Group (FRWG), announced by HM Treasury (HMT) and the U.S. Department of the Treasury (UST) in April 2018 [2].

BAFA argues that establishing the right parameters and repurposing the FRWG behind a long-term vision will enhance regulatory dialogue. In turn, this will reduce cross-border frictions between the UK and US; bolster cross-border investment; and support stronger economic growth and job creation for both countries.

“This is an important strategic opportunity for the US financial services industry to strengthen cross-border regulatory and supervisory cooperation between the United Kingdom and the United States,” said Kenneth E. Bentsen, Jr., president and CEO of the Securities Industry and Financial Markets Association (SIFMA). “We look forward to working with policymakers and regulators on both sides of the Atlantic on this moving forward.”

“In today’s economy, many barriers preventing cross-border trade and investment in financial and professional services are regulatory in nature. For our industry, achieving compatibility of regulatory standards is therefore essential to support growth on both sides of the Atlantic. A robust regulatory dialogue will help achieve this. It also presents an opportunity for the UK and the U.S. to work even more closely together in international regulatory forums to achieve shared priorities,” said Catherine McGuinness, Deputy Chair of TheCityUK, and Chair of Policy and Resources Committee for the City of London Corporation.

The paper examines regulatory cooperation in a trade agreement and the architecture for regulatory dialogue between officials and also between officials and BAFA. It also highlights significant areas where the FRWG can help deliver a forward-looking vision: market integrity, data transfer, FinTech, cybersecurity and operational resilience, prudential measures, market access barriers, global financial stability, market fragmentation, and audit and accounting.

About The British American Finance Alliance (BAFA)
The British American Finance Alliance (BAFA) is a coalition of 20 British and American trade associations and industry bodies representing both financial and professional services. It was formed in September 2018 as the UK-U.S. Financial and Related Professional Services Industry Coalition to ‘actively contribute to the overall trade and investment discussions between the UK and U.S. and offer specific industry input on issues such as the process underpinning the regulatory dialogue and its substantive priorities.’ BAFA day to day operations are co-supported by the Securities Industry & Financial Markets Association (SIFMA) and TheCityUK (TCUK).

Members of BAFA
Alternative Investment Management Association (AIMA), American Council of Life Insurers (ACLI), American Property and Casualty Insurance Association (APCIA), Association of British Insurers (ABI), Association of Chartered Certified Accountants (ACCA), Association for Financial Markets in Europe (AFME), Bankers Association for Finance and Trade (BAFT), Bank Policy Institute (BPI), British American Business (BAB), City of London Corporation, Coalition of Service Industries (CSI), Institute of Chartered Accountants in England and Wales (ICAEW), Investment Association (IA), Investment Company Institute (ICI), London Market Group (LMG), Re-Insurance Association of America (RAA), Securities Industry & Financial Markets Association (SIFMA), TheCityUK (TCUK), The Law Society of England and Wales, US Chamber of Commerce (USCC), UK Finance.

BAFT Media Contact:
Blair Bernstein
[email protected]
+ 1 (202) 663-5468

BAFT Files Joint Association Comment Letter to EU Policy Makers Regarding Credit Insurance During COVID-19

On April 14, 2020 BAFT along with the ITFA, the Berne Union, the IACPM, the IUA and Lloyd’s Market Association filed a joint comment letter to policy makers in the European Union regarding the ongoing discussion about facilitating bank lending and the role of credit insurance amid the COVID-19 crisis.

The International Trade and Forfaiting Association (ITFA), the Bankers Association for Finance and Trade (BAFT), the Berne Union, the International Association of Credit Portfolio Managers (IACPM), the International Underwriting Association (IUA) and Lloyd’s Market Association (LMA) follow with great interest and appreciate the ongoing discussion of the policymakers in the European Union about facilitating bank lending amid the COVID-19 crisis. The aforementioned industry representatives believe that when it comes to credit insurance and guarantees, public and private sectors are inextricably connected through their respective complementary roles.

We welcome the initiatives to reconsider the provisioning requirements for loans covered by Export Credit Agencies and other publicly guaranteed loans. This will be a very helpful measure to enable banks to continue the flow of much needed trade finance.

We wish to highlight that the private credit insurance market also provides important support to economic activity within Europe through facilitating bank lending in the same way as public sector Export Credit Agencies. Like Export Credit Agency cover, private credit insurance support a wide range of short, medium and long-term bank lending, including trade-related, asset-backed and corporate loans, for activities across the entire European Union and worldwide.

Read the full Comment Letter in the Library of Documents page under Comment Letters.

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