Financial Structuring - Prudential Regulation
We act for a wide range of banks, investment firms, corporates, pension funds and insurers. We advise in both a transactional and advisory capacity, focussing on:
- Prudential regulation: all aspects of prudential regulation and associated structural reform rules (including those based on resolution and ring-fencing requirements). We advise on transactional solutions to help banks comply with the rules in an optimal way.
- Credit risk mitigation: collateralisation and other credit risk mitigation techniques – and applying these techniques (often in a complex/bespoke manner) across a wide spectrum of transactions.
- Financial market infrastructure and events: key aspects of the “plumbing” of financial markets, together with broader market/political developments affecting banks, and applying that knowledge in a wider transaction context. This encompasses issues such as Brexit planning, LIBOR discontinuance, rules affecting CCPs and payment services.
We also support clients on these issues by looking for business appropriate AI solutions for them.
Prudential regulation including structural reform
- We regularly advise UK and international banks in relation to the capital treatment of their exposures, as well as the application of the liquidity, large exposures and leverage ratio rules to their particular products and/or businesses.
- We have assisted a number of banks develop compliant policies and internal checklists to facilitate consistent application of regulatory rules around netting and treatment of certain asset classes and have assisted banks under investigation or regulatory scrutiny in relation to the capital treatment of aspects of their portfolios
- Structural reform: We acted as strategic counsel for two large UK banks in connection with their ring-fencing arrangements. We have also developed bespoke software (“LinkRFI”) to help ring-fenced banks check whether customers are relevant financial institutions for ring-fencing purposes. We have licensed the software to several UK banks for application as part of on-boarding and ongoing customer KYC reviews.
- As part of the wider Linklaters Fintech initiative, we advise Fintech and big tech companies (including Revolut) on steps to optimise their group legal entity and regulatory capital structures as they scale their businesses and bring new business to market.
Credit risk mitigation
- We advise on a variety of both unfunded and funded credit risk mitigation arrangements driven by prudential regulatory capital requirements. These include bespoke security and title-transfer arrangements, collateralised risk-participations as well as more usual guarantees, credit insurance, netting and sub-participation arrangements designed to optimise regulatory capital treatment.
- We also advise on high value, complex financial collateral and asset-backed structures for pension schemes and insurers including advising on: (i) security and title transfer collateral arrangements to support longevity reinsurance transactions; (ii) collateralised buy-in transactions; (iii) security arrangements to support the reinsurance phase of purchases of bulk annuities; and (iv) security arrangements to support ongoing deficit recovery payments to pensions schemes.
- We also advise on margin lending transactions and their related collateral and custody arrangements.
Financial market infrastructure and market events
- We regularly advise leading clearing houses (including Eurex Clearing, HKSCC and HK OTC Clear) on the enforceability of their clearing rules under UK law including on the insolvency of a Clearing Member. We also advise both Clearing Members and clients on the capital treatment of cleared transactions under the Capital Requirements Regulation 2013/575.
- We (along with other product specific Linklaters teams) are advising a number of banks in relation to their LIBOR transition.
- We (along with other product specific Linklaters teams) are advising a number of banks on the impact of Brexit and in particular how to mitigate certain risk and capital impacts.
Follow the links below for a selection of our publications and insights.