ISDA Hedges Its Brexit Bet with French, Irish Law Recognition
The global swaps and derivatives watchdog adds France and Ireland to its dispute resolution destinations.
When a company hedges its FX risk, it uses derivatives to cover itself against the possibility of an adverse change in currency exchange rates. The International Swaps and Derivatives Association, the group that governs derivative use worldwide, decided this week to do a little hedging of its own with the release of French and Irish versions of its master agreements. This was done, it said, in order to guard against the possibility that EU users might not want to employ English law after Brexit. Adding France and Ireland to the available dispute centers – currently the UK, New York State or Japan – allowed the association to “prepare for some of the possible outcomes” following Brexit, ISDA chief exec Scott O’Malia said.
But they might not be needed, according to Marc A. Horwitz, an attorney for DLA Piper. “These agreements may be useful for two domestic parties (e.g., a French bank trading with a French corporate) who wish to resolve disputes in local courts under local law, but otherwise [they] likely will not have much application.” Read more here.
Also this week, despite new benchmarks announced to step in if and when the infamous and tainted London Interbank Offered Rate exits, there are not a lot of products out there to help MNCs transition from the scandalized benchmark. Of the prevailing new benchmarks, there is the Secured Overnight Funding Rate, or SOFR, from the New York Fed, and the Sterling Overnight Index Average, or SONIA, from the Bank of England. However, there are not yet many products based on either one. Meantime many companies are uncomfortable continuing to use longer-term Libor-based loans given regulators globally have set 2021 as a deadline beyond which banks no longer must contribute to Libor panels. Read more here.
Finally, treasurers know there are great benefits to automation and moving to cloud solutions. But they should be careful in their considerations because TMSs can be expensive and end up not working out; or they include functions that aren’t needed. That was one of the takeaways from results of a broad survey of US and Canadian corporate finance executives by staffing firm Robert Half.
“What is the cost in relation to the potential benefits?” said Kenneth Kirk, CFO of Sepro Mineral Systems, in Langley, British Columbia, who participated in the survey. He added that the cost can be high because some automation software is pricey. “And a lot of the solutions are overkill. They look nice but aren’t practical. Vendors often make these solutions look a lot easier to operate than they are.” Read more here.
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