The International Trade and Forfaiting Association (ITFA), BAFT, an international financial services association, and law firm Sullivan & Worcester have joined forces in producing a joint industry standard legal opinion for banks to use in satisfying new regulatory requirements in the European Union.
The legal opinion will benefit ITFA and BAFT members by reducing costs and complexity for banks subject to the EU rules. It will also simplify doing business under the English law version of the BAFT master participation agreement (MPA), which is an industry standard for the transfer of trade finance risk using a common framework, enabling more liquidity to meet financing needs.
This opinion reduces, at a stroke, the need to carry out much of the expensive and onerous groundwork. Paolo Provera, ITFA
Under article 194.1 of the capital requirements regulation, credit risk mitigants, like the BAFT MPA, need a legal opinion on whether their credit protection arrangements are legally effective and enforceable in all relevant jurisdictions.
Geoffrey Wynne, head of the trade and export finance group and Sullivan & Worcester’s London office, who signed the legal opinion, tells GTR: “The idea was to find a pragmatic and cost effective way to deal with the requirement and we hope we have achieved this for BAFT and ITFA members.”
“Our members make wide use of the BAFT MPA as one of their tools for distributing trade risk in the broadly-based modern forfaiting industry,” says Paolo Provera, chairman of ITFA. “This opinion reduces, at a stroke, the need to carry out much of the expensive and onerous groundwork in ensuring the agreement meets capital rules requirements.”
Tod Burwell, BAFT president and CEO, adds: “For both BAFT and ITFA, this legal opinion is critical to ensuring regulatory compliance while continuing to meet the needs of trade finance clients around the world.”