FBF publishes the 2013 version of its master agreement on forward financial instruments incorporating the EMIR rules

The French Banking Federation (FBF) today publishes an updated version* of its master agreement on transactions on forward financial instruments.

This master agreement gives French companies and investors, regardless of their size, a flexible and purpose-built contractual framework for their derivative transactions (including hedging transactions such as interest rate or currency derivatives), which are an essential complement to their financial and risk management.

The new version is designed to incorporate the requirements set out in the new European Regulation on OTC derivatives, central counterparties and trade repositories (“EMIR“)⁽¹⁾ .

Published in July 2012, EMIR imposes new obligations on parties to OTC derivative transactions which are designed to improve transparency and confidence in the derivatives market, a process which is supported by the banking profession. The amendments to the master agreement therefore incorporate the following rules:

• Declaration of regulatory clearing status: each party to the master agreement must declare its status in respect of EMIR (financial or non-financial counterparty, and whether or not subject to mandatory clearing of derivative transactions);

• Obligation to clear certain transactions: parties to the master agreement, as soon as one or more transactions become clearable, undertake to take all steps necessary to allow the clearing of their transactions through a central counterparty;

• Risk management techniques: parties subject to this obligation undertake to put in place procedures and steps to measure, monitor and mitigate operational and credit risks for:
  – reporting of transactions;
  – portfolio reconciliation, compression and dispute resolution;
  – daily valuation of transactions; and,
  – timely, accurate and appropriately segregated exchange of collateral.

In publishing this 2013 version of the master agreement in French and English, the FBF is also making available a number of other contractual documents⁽²⁾. Market participants and their advisors can therefore benefit from up-to-date French law documentation allowing them to rapidly update existing master agreements in a uniform manner, respecting any applicable legal constraints.

* This updated version was prepared in collaboration with the law firm Jones Day.

⁽¹⁾ Regulation (EU) 648/2012 of the European Parliament and Council of 4 July 2012.

⁽²⁾ Contractual documents complementing the new version of the master agreement: (i) a 2007-2013 Supplementary agreement for all users who require a standard agreed market version that will quickly and consistently update the 2007 Agreement for all the main changes in the 2013 version and (ii) three EMIR Annexes that only incorporate the EMIR requirements into Agreements already signed under the 1994, 2001 and 2007 versions. This documentation will be expanded as the various EMIR obligations progressively come into force.

FBF Master Agreement relating to transactions on forward financial instruments