New standardized documentation will allow market participants to rely on up-to-date and robust documentation for repurchase transactions, in line with international standards.
The French Banking Federation ("FBF") has published new French law‑governed standard documentation for repurchase transactions ("repos"). It updates the 2007 version of the FBF master agreement to reflect legal and regulatory changes and introduces substantial amendments to align with international standards such as the Global Master Repurchase Agreement ("GMRA").
Key enhancements include:
- Valuation for margining: No longer limited to the latest quotation available on the regulated market, the definition offers greater flexibility and Parties may reference a generally recognized pricing source if quotations on the relevant trading platform are unavailable.
- Hedging costs: Upon early termination following an Event of Default or a Change of Circumstances, the calculating party may include hedging costs or gains in the Settlement Amount.
- Default value of securities: The approach is substantially revised and offers greater flexibility in line with the GMRA. Valuation is no longer limited to the latest quotation available on the regulated market and may notably take into account the price obtained in order to sell or buy, as appropriate, all or part of the relevant securities, the latest quotation on the relevant trading platform, and/or offer or bid quotations. The default value may also take into account the "fair value" as determined by the calculating party if such party acting in good faith has been unable to sell or buy, as appropriate, the securities or to obtain quotations or if such party acting in good faith determined that it would be commercially impossible or unreasonable to buy or sell the securities, as appropriate, or to rely on such quotations.
In the post Brexit context, this long-awaited French law-governed master agreement provides the French repo market with up-to-date and reliable documentation.
Jones Day assisted the French Banking Federation in drafting this new documentation.
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