LMA responds to the UK Treasury Committee's Call for Evidence on EU Exit and Transitional Arrangements01 February 2017
The Loan Market Association (LMA) has responded to the UK Treasury Committee's call for evidence on EU exit and transitional arrangements, in preparation for the start of official negotiations upon the triggering of Article 50. The call for evidence is particularly important as the UK Government forms its strategy on exiting the EU and the priorities it must consider when negotiating with the 27 other EU nations.
The LMA response sets out the need for, and importance of, transitional arrangements for the loan market following the UK's exit from the EU, and is based on an ongoing dialogue with our members, and UK and European Governments, to ensure that the UK's exit has as little adverse impact as possible on the syndicated loan market and those participating in it.
The LMA points out that the loss of the CRD passport – which covers lending – will have a major impact on some lending and loan market activities conducted by banks in and through the UK, unless mitigating measures are agreed, including a transitional period following exit from the EU. The LMA provides a number of statistics quantifying the current extent of cross-border lending activity to illustrate the mutual benefit of a continued relationship with respect to the loan product. In addition, the LMA notes a number of complications that a complete severing of ties would have for both UK-based and EU-based lending institutions which the UK Government should consider when negotiating its exit and potential transitional arrangements.
Commenting on the Call for Evidence on EU Exit and Transitional Arrangements, Nicholas Voisey, LMA Managing Director, said:
"A sudden withdrawal of passporting rights could affect both the enforceability of existing loan agreements and the ability and willingness by lenders based in the UK and EU-27 to enter into future agreements. Transitional arrangements are required to avoid these damaging effects. In the absence of such a commitment, lenders based in the UK and EU-27 may start withdrawing lending activity, as well as existing agreements being affected, prior to the EU exit.
The transitional arrangement should be as broad as possible to ensure that the fullest range of rights and obligations remain available for discussion as part of the future UK-EU agreement. This should include the continuing right for UK banks and non-banks to make and own loans to EU27 entities. Loans originated or acquired by passported firms at a time when those firms were validly authorised should also not be affected by the termination of the rights of those firms."