Today the Prudential Regulation Authority (PRA) has published a Policy Statement (PS 8/19) and updated Supervisory Statement (17/13 “Credit Risk Mitigation”, which will come into force on 13 September 2019) in relation to the use of different types of guarantees as unfunded credit risk mitigation (CRM) for the purposes of calculating capital requirements under the Capital Requirements Regulation (575/2013) (CRR).
By Sam Fowler-Holmes and Fiona Luong
UK companies who are trading or are considering trading with Iran may now face potential criminal penalties for breaching the EU Blocking Statute, underscoring the need to carry out due diligence in order to best manage their risk profile. This includes:
- assessing whether any authorisations are required from either the US or EU in relation to current and future business activities (e.g. by obtaining the EU Commission’s authorisation to comply with specified US extraterritorial sanctions); and
- weighing up the risks associated with breaching US extraterritorial sanctions against those of breaching the EU Blocking Statute and updating internal policies, protocols, and business plans (where appropriate).
This may cause problems for parties who will be caught between US sanctions and UK/EU requirements.
by Amanda Montano and Judith Abanto
Kicking off the monthly Breakfast Seminar series for 2019, Sullivan & Worcester’s London partner Mark Norris gave a presentation on the key compliance risks faced by trade and project finance practitioners.
Putting the need for compliance in context, he reported that the World Bank and the OECD estimate that bribery, tax evasion and corruption are responsible for revenue losses in the billions, particularly in poorer economies.
By Hannah Fearn
I recently had the pleasure of attending the 2019 BAFT Europe Bank to Bank Forum in London. The well-attended event included many highly informative panel talks covering a range of topics, but with a particular focus on the future of trade finance.
Highlights included a discussion on the challenges facing the digitisation of trade (including legal and regulatory hurdles) and insights into how banks manage liquidity in the era of instant payments. BAFT took advantage of technology to make the sessions as interactive as possible, with delegates able to use their phones to participate in live polls and Q&As.
By Fiona Luong and Geoff Wynne
On August 6, 2018 President Trump issued an executive order re-imposing certain sanctions that were lifted under the 2016 Joint Comprehensive Plan of Action ('JCPOA'). These include the prohibition of:
- The purchase or acquisition of US dollar banknotes by the Iranian government;
- Iran’s trade in gold or precious metals;
- The sale, supply or transfer (whether direct or indirect) to or from Iran of materials such as graphite, raw or semifinished metals, including aluminium and steel, coal and software, or integrating industrial processes;
- ‘Significant’ transactions involving the purchase or sale of Iranian rials, or maintenance of ‘significant’ funds or accounts outside Iran denominated in rials;
- The purchase, subscription to or facilitation of the issuance of Iranian sovereign debt; and
- Transactions within Iran’s automotive sector.
While we are waiting on the LMA's Working Sub-Group on Transition Issues in Syndicated Loan Markets to produce draft provisions dealing with the transition to SONIA, their US counterpart, the Alternative Reference Rates Committee (ARRC) has already done so for SOFR, the US dollar risk free rate (RFR), in its recent consultation paper "Regarding More Robust LIBOR Fallback Contract Language for New Originations of LIBOR Syndicated Business Loans".
The ARRC's approach is likely to be influential for the LMA in relation to transitional drafting for USD (and potentially for other currencies as well in the interests of consistency). The highlights of the ARRC consultation paper include:
I recently authored the article "Documenting to Improve Regulatory Compliance," published by Trade Finance.
In the article I look at how, in a world of ever increasing regulation, there might be some areas in trade finance documentation where parties can show they are addressing concerns and taking steps to protect their position against a review by Regulators of what they are doing. The article looks at the position under English law and in light of current and future UK regulations.
Topics: Trade Finance
By Amanda Montano, S&W Associate and Fiona Luong, S&W Trainee
Having been instructed by BAFT to prepare the revised Master Participation Agreement, Sullivan & Worcester’s London Trade Finance team gave a presentation on ‘All you need to know about the BAFT MPA’ at the firm’s September Seminar.
Attended by an audience of more than 100 financial institutions and participants in the trade finance market, Geoff Wynne and Hannah Fearn talked about the key changes and implications of the new MPA.
I am very pleased to tell you that Robert Franklin has joined the firm. Robert is a former colleague and joins us as senior counsel in the finance team in London, where his role is to expand and help lead the project finance practice.
Topics: Project Finance
From Tuesday 4th to Thursday 6th September 2018, ITFA, the International Trade and Forfaiting Association, a worldwide trade association for companies, financial institutions insurers and intermediaries engaged in trade and forfaiting, hosted its 45th Annual International Trade and Forfaiting Conference in Cape Town.