PRESS RELEASE: ITFA and BAFT Produce Trade Risk Participation Legal Opinion

The International Trade and Forfaiting Association (ITFA) and BAFT, an international financial services association, announced today 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).  Input to the opinion came from working groups of both associations.

Under these new European regulatory requirements, 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.”

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

Both the legal opinion and an accompanying guidance note can be viewed in the member area.