Aide memoire of the 13th meeting of the European Financial Markets Lawyers Group

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13th meeting of the European Financial Markets Lawyers Group

Wednesday, 18 February 2004

Room CII, 36th floor, at the ECB in Frankfurt

Agenda

ITEM 1: Approval of the agenda and of the aide-mémoire of the last meeting

ITEM 2: Enforceability of insolvency close-out netting arrangements under EU legislation

As a follow-up to the last EFMLG meeting, the sub-group on netting issues has revised the draft letter to the European Commission, including a new section on the Insolvency Regulation, expressing the EFMLG's views regards enforceability of insolvency close-out netting provisions in the Collateral and Winding-up Directives and the Insolvency Regulation. The EFMLG is invited to discuss and possibly endorse the letter which could be sent subsequently to the Commission. The group will also be informed about the liaison with ISDA on the co-ordination of the respective activities.

Document: Draft letter to the Commission, article "An Italian perspective on set-off as permitted by the insolvency regulation"

ITEM 3: Netting arrangements in the acceding countries

After the last EFMLG meeting, several EFMLG members expressed interest in participating in the project. Contribution on the validity and enforceability of netting agreements in the acceding countries is due by the 24 January. On the basis of these contributions the report on netting in acceding countries is to be updated and shared with EFMLG. It is to be discussed on the meeting if and in what form the project could be developed further.

Document: EFMLG initial survey on the Regulation of close-out netting in the countries acceding to the EU, ISDA letter 'The Regulation of Close-out Netting in the Countries Acceding the European Union'

ITEM 4: EFMLG/ACI Project on Short-term Securities

The group will be informed on the state of the EFMLG/ACI Project on Short-term Securities

ITEM 5: Deposit netting

Olof Myhrman will present the issue of deposit netting with a view on the substantial gains to make from this by capital relief in the countries where this is allowed. The British Bankers Association (BBA) published a standard form of agreement for this many years ago, but outside the UK only some banks appear to do use it. This is probably due to that the only other countries hosting major banks, which allow this, according to BBA, are Japan and the Netherlands . Sweden has now joined that group. The group could discuss whether they could promote deposit netting throughout the EU.

Document: BBA Deposit Netting Agreement

ITEM 6: Signing authorities and the enforceability of master agreements

Helen Moran will inform the members on the results of the survey that had been obtained by the EFMLG members in response to the questionnaire on the subject and will explain the further course of action to be taken by the sub-group.

Documents: Issues note 'Execution Formalities in respect of Master Agreements', Summary of the responses received to the Questionnaire and issues note

ITEM 7: Corporate crisis: legal issues of interest for banks / corporate bonds issuance and conflict of interests

The recent insolvency of a major European corporate has made evident a number of legal and regulatory issues that call into question banks' legal liability. The main legal issues identified so far that will deserve further attention will be presented.

The Sanpaolo Imi representative will present a note concerning the problem of conflict of interests of a bank when lending and providing investment services to the same entity. In fact, there seems to be a structural conflict of interests that put at stake the responsibility of a bank. Additionally, the banking secrecy could be at stake when conflicting with duty of disclosure related to the provision of investment services to the same entity. The application of insider trading rules may be also at stake. As a result, considerable legal risks could emerge for banks.

Document: Parmalat case - 'recent corporate failures: some reflections on legal and regulatory issues', Annex 1 - the Cirio and Parmalat scandals: outline of main events, Annex 2 - legal issues related to public and private offering, 'Corporate bonds: an overview of financial intermediaries' critical duties and responsibilities' bu Emilio de Lillo

ITEM 8: Legal risk

In the context of the revision of the Basel Capital Accord (Basel II), intended to be implemented in December 2006, reference is made to a concept which was previously not known in the context of capital adequacy. This is the notion of “l egal risk ”, which is understood to be a segment of the wider notion of “operational risk”. There are on-going attempts, for instance by a working party of the IBA, to provide for a definition of what constitutes legal risk. The group is asked to consider whether they could actively contribute to the on-going debate.

Documents: Issues note on legal risk and Suggested IBA definition of legal risk

ITEM 9: Joint meeting between the EFMLG, FMLC and FMLC in London

The Secretariats of the New York 's FMLG and of London 's FMLC have approached the EFMLG with the idea of organising a joint tripartite meeting hosted by the Bank of England in London , to address issues of joint interest. The EFMLG is asked to comment and to suggest items of transatlantic interest.

ITEM 10: Other matters

(a) General discussion on matters of relevance to the European Financial Markets

(b) Response of the EFMLG to the EU enlargement

As a follow-up to the discussion at the last meeting, the members are asked to agree on the representation of the acceding countries in the EFMLG. Suggestions for possible candidates are welcome.

(c) EFMLG website – restricted member area

The group will be informed about the access to the recently established closed member area within the EFMLG website.

(d) Date of next meeting

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