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LMA Publishes Paper on Impact of a No-Deal Brexit on the European Loan Market

On December 3, the Loan Market Association (LMA) published a paper on the consequences of a scenario in which the United Kingdom withdraws from the European Union (Brexit) without concluding a withdrawal agreement, commonly referred to as a “no-deal Brexit.” The paper focuses on the impact of a no-deal Brexit on lending by UK lenders to borrowers located in the remaining 27 member states of the European Union (EU27), and the wider negative impact on the EU economy.

In its paper, the LMA states that it is vital that transitional arrangements are put in place as soon as possible so that borrowers are adequately protected, irrespective of the manner in which Brexit is affected. The LMA sets out a number of issues which arise when considering the need for transitional arrangements in the context of a syndicated loan market, along with proposed solutions, such as:

  • Licensing and the ability to conduct cross-border business with respect to both new and existing customers in the EU27;

  • Ensuring the continuing validity, effectiveness and enforceability of the loan contract itself, including the extent to which courts of the EU27 will continue to give effect to judgments of English courts;

  • Ancillary issues beyond the scope of core lending activity, but which might impact the decision or ability of an institution to lend.

The LMA’s paper also notes that, as part of many syndicated loan arrangements, borrowers require access to not only the syndicated loan itself, but also an integrated, so-called “package” of products and services provided by both syndicate lenders and potentially other specialist providers. Without appropriate transitional arrangements in place to ensure ongoing access to the full range of products and services, the LMA states that many borrowers may find themselves in a difficult situation if a particular product becomes illegal to provide by a particular party post-Brexit.

The LMA concludes by advocating the imposition of transitional arrangements as a matter of urgency, as any gap or delay in such arrangements becoming effective could significantly negatively impact EU borrowers, as well as the wider EU economy.

The LMA paper is available here.

©2019 Katten Muchin Rosenman LLP

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John Ahern, Financial Attorney, London, Katten Law Firm
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John Ahern, partner at Katten Muchin Rosenman UK LLP and head of the London Financial Services group, focuses his practice on banking, financial services, UK and European financial markets, and related regulations. His background in private practice and as in-house counsel at a global investment bank provides him with perspective on the unique regulatory issues facing the wholesale and private banking sectors. John advises multilateral trading facilities, broker-dealers and banks on trading, clearing and settlement as well as custody of securities—both physical and...

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Carolyn H. Jackson, International Attorney, Katten Muchin law firm
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Carolyn Jackson is a partner in Katten Muchin Rosenman UK LLP and is a Registered Foreign Lawyer. She provides US financial regulatory legal advice to a broad range of market participants, including commercial banks, investment banks, investment managers, broker-dealers, electronic trading platforms, clearinghouses, trade associations and over-the-counter derivatives service providers.

Carolyn guides clients in the structuring and offering of complex securities, commodities and derivatives transactions and in complying with US securities and commodities laws and regulations. 

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Nathaniel Lalone, Katten Muchin Law Firm, Financial Institutions Attorney
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Nathaniel Lalone, a partner at Katten Muchin Rosenman UK LLP, has a broad range of experience in the regulation of financial products and financial markets, and frequently provides regulatory and compliance advice to trading venues, clearing houses and buy-side firms active in the over-the-counter (OTC) derivatives, futures and securities markets. He is actively involved in advising clients on the implementation of MiFID 2 and MiFIR in the European Union as well as the international reach of US financial services regulation. He also has significant experience with structuring...

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Neil Robson, private equity fund managers counselor, Katten Law Firm, London
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Neil Robson, a regulatory and compliance partner with Katten Muchin Rosenman LLP, focuses his practice on counseling hedge and private equity fund managers and other investment advisers on operational, regulatory and compliance issues. He regularly addresses Financial Conduct Authority (FCA) and EU authorization and compliance under both the EU Alternative Investment Fund Managers Directive (AIFM Directive) and MiFID, cross-border issues in the financial services sector, market abuse, anti-money laundering and regulatory capital requirements, formations and buyouts of...

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