Trade

On May 13, 2020 BAFT and ITFA published wording guidance for Master Participation Agreements (MPAs) during the transition away from LIBOR.

BAFT and ITFA are developing updated standard wording for use in BAFT MPAs following the transition from LIBOR. As forward looking benchmark rates are not yet available, the Associations request avoiding the use of institution specific wording.

During the interim to preserve consistent standard MPA documentation wording for longer-dated transactions, a high-level disclaimer has been developed for inclusion in marketing materials and term sheets.

Please access the full guidance document in the Library of Documents page under BAFT Standard Documents.

BAFT issued comments in response to the ARRC Consultation on Spread Adjustment Methodologies for Fallbacks in Cash Products Referencing USD LIBOR.

On March 25, 2020, BAFT issued comments in response to the ARRC Consultation on Spread Adjustment Methodologies for Fallbacks in Cash Products Referencing USD LIBOR. In addition to responding to the consultation, BAFT made the case that the lack of a forward looking SOFR term reference rate presents operational challenges for this business line and encouraged the ARRC to develop a working group focused on trade finance to address issues specific to this subset of the industry. The comments are posted on the Library of Documents page under Comment Letters.

On February 13, 2020, the Global Supply Chain Finance Forum (GSCFF) made up of the major global associations representing the trade finance market including BAFT, FCI, the ICC, the ITFA and the EBA, published a Payables Finance white paper to allay concerns and clarify what Payables Finance is and how it works.

BAFT, a member of the Global Supply Chain Finance Forum (GSCFF), jointly published with its forum partners the EBA, FCI, the ICC and the ITFA the white paper titled Payables finance-how it helps global supply chains. The white paper is a factsheet from the GSCFF that explains the SCF Payables Finance technique-how it works and why, and when appropriately used, how it benefits supply chain buyers and suppliers.

To view the white paper, visit our Library of Documents under the White Papers section.

IIFM and BAFT announced the release of their joint initiative of creating global master participation agreements to support the development of Islamic trade finance business.

IIFM and BAFT Publish MPA’s for Islamic Trade Finance

WASHINGTON  — IIFM (International Islamic Financial Market) and BAFT (Bankers Association for Finance & Trade), announced the release of their joint initiative of creating global master participation agreements to support the development of Islamic trade finance business.

The IIFM-BAFT Master Participation Agreements (IIFM-BAFT MPA’s) consist of two separate standardized framework documentation to cater for Shari’ah-compliant Unfunded and Funded participation arrangements for trade finance transactions. The master agreements are supplemented by a Structure Memorandum and an Operational Guidance Memorandum to provide better understanding on use of the documentation from Shari’ah, legal and operational aspects. In addition, there are separate Shari‘ah pronouncement for each MPA standard.

“Trade finance plays an important role in the global financial system, and for Islamic finance it presents a huge opportunity which the market participants must avail,” said Khalid Hamad, chairman of IIFM. “The IIFM-BAFT Master Participation Agreements, like previous IIFM standards, will provide greater transparency, cost and time efficiency, legal certainty as well as Shari’ah harmonization which in turn will contribute in creating more active Islamic trade finance business.”

“Islamic trade has become an important transaction stream in many markets,” said Tod Burwell, president and CEO of BAFT.  “By standardizing the framework for Shari’ah-compliant participation arrangements relating to trade, we hope that transaction execution will become easier and trade will continue to facilitate economic growth in these markets.”

“The IIFM-BAFT MPAs are developed based on a comprehensive industry consultation process under the guidance of the IIFM Shari’ah Board,” said Ijlal Ahmed Alvi, CEO of IIFM. “The MPAs provide the market participants with a robust and ready-to-use documentation. This is yet another major accomplishment for the Islamic finance industry, and going forward IIFM will aim to tackle other pressing issues relating to trade finance including Islamic trade finance products as part of the MPA’s development.”

IIFM and BAFT acknowledge the support of The Waqf Fund (Bahrain) for providing financial assistance grant in the development of these important standard documentations which is helping in the sustainable development of Islamic finance industry.

The templates may be found here

About IIFM
IIFM is established under Royal Decree (23) Year 2002 of the Kingdom of Bahrain as a neutral and non-profit standard setting organization that has been mandated to develop Shari’ah-compliant financial documentation and product confirmation Standards for the Islamic Financial Services Industry. IIFM’s other services include organizing specialized industry awareness seminars, technical workshops and industry consultative meetings as well as publishing research papers and an annual Global Sukuk Report. The organization’s website is www.iifm.net

About BAFT
BAFT, the leading global financial services association for international transaction banking, helps bridge solutions across financial institutions, service providers and the regulatory community that promote sound financial practices enabling innovation, efficiency, and commercial growth. BAFT engages on a wide range of topics affecting transaction banking, including trade finance, payments, and compliance. The association website is www.baft.org.