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.