LMA Paper on the Consequences of a No-Deal Brexit on the European Loan Market

On December 3, the Loan Market Association (“LMA“) published a paper on the impact of a no-deal Brexit scenario on lending to borrowers located in EU countries by UK lenders, and the wider negative impact on the EU economy. A link to the paper can be found here.

The LMA states that it is vital that transitional arrangements are put in place as soon as possible so that borrowers are adequately protected irrespective of the manner of exit of the UK from the EU. It sets out a number of issues which arise when considering the need for transitional arrangements in a syndicated loan market context, along with proposed solutions, including:

  • Licensing and the ability to do cross-border business in respect of both new and existing customers.
  • Ensuring the continuing validity, effectiveness and enforceability of the loan contract itself, including the extent to which judgments of the English courts will be enforceable in EU member states.
  • Ancillary issues outside of core lending activity but which might impact the decision or ability of an institution to lend.

The paper also sets out a “package” of products and services provided by both syndicate lenders and other specialist providers, which borrowers require access to in addition to the syndicated loan itself. The LMA states that without appropriate transitional arrangements, borrowers may find themselves in a difficult situation if a particular product becomes illegal to provide post-Brexit.