Monday, 18 May 2015


The International Trade and Forfaiting Association (ITFA) and the Bankers Association for Finance and Trade (BAFT), an international financial services association, recently announced a joint industry standard legal opinion for banks to use in satisfying new regulatory requirements in the European Union.

ITFA and BAFT, working through the law firm Sullivan & Worcester, jointly produced this legal opinion as a benefit for their member institutions to reduce the cost and complexity for banks subject to the EU rules, and to increase the ease of 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.  Input to the opinion came from working groups of both associations.

Under these new European regulatory requirements, specifically in Article 194.1 of the capital requirements regulation, credit risk mitigants, like the BAFT MPA, will need a legal opinion on whether their credit protection arrangements are legally effective and enforceable in all relevant jurisdictions. The legal opinion, issued by Sullivan & Worcester, is designed to facilitate this process for members of ITFA and BAFT.

“Our members make wide use of the BAFT Master Participation Agreement as one of their tools for distributing trade risk in the broadly-based modern forfaiting industry,” said Paolo Provera, chairman of ITFA. “Reducing the expense of regulatory compliance is one of the tasks ITFA has set itself. 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.” 

“The BAFT Master Participation Agreement facilitates distribution of trade risk using a common framework, thus enabling more liquidity to meet financing needs,” said Tod Burwell, BAFT president and CEO. “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.”

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.”

The BAFT MPA is an industry standard for the transfer of trade finance related risk.  Its English and New York law forms have been vital tools for the international banking industry for nearly 10 years.

The Legal Opinion and an accompanying Guidance Note are available to ITFA members.  Please click here, Member Area, to review both documents. Kindly note that login details are necessary to access this restricted area on the ITFA website. 

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