On 10 January, ISDA issued FAQs on swap contract status, post-Brexit.

  • Covers topics including contractual points under ISDA documentation, choice of law,
    jurisdiction and recognition of judgments, insolvency, access to EU financial market.
  • European Markets Infrastructure Regulation, or EMIR, collateral, Settlement Finality
    Directive, amendments to ISDA Master Agreement and transfer of existing contract.

EU Financial Markets

  • Many member State rules do not allow third country firms without passport to enter
    into derivatives with local counterparty, unless reverse-solicitation, local exemption.
  • UK may request an equivalence decision per MiFID 2, which would permit UK firms
    to provide investment services either to eligible counterparties or professional client.
  • While UK regime should, objectively, be equivalent, no guarantee in practice that an
    equivalence decision will be granted or even when such a decision would be granted.

CRD IV Passport Options

  • In absence of agreement between UK and EU to extend CRD 4 passport for banking
    services to the UK, UK credit institution would have to do one of 2 things, as follows.
  • Either (i) provide banking services on a wholly unsolicited basis, or else on the basis
    of narrowly defined local law exemptions, or (ii) would need to establish a subsidiary.
  • And then obtain authorisation in an EU Member State to provide services in question.
  • EU firms without UK branch, may still be able to carry out derivatives business in UK.
  • If transitional period agreed, temporary permission grant overseas person exempted.