The ISMA Repo Committee today issued guidance to members concerned about the impact of impending legislation on repo transactions in Spain. Repo market professionals are concerned that legislation about to be passed by the Spanish government will render repo transactions in Spain governed by the GMRA unenforceable. Particular doubts surround the enforceability of the close-out and netting provisions under Spanish insolvency law, and the risk that margin provided under the GMRA will be re-characterised.
The ISMA letter to members says these worries can be obviated by excluding certain transactions from the GMRA or re-pricing transactions in Spain instead of calling for margin. ISMA has supplied its members with a draft side letter modifying the GMRA to accommodate these possibilities, but emphasises it accepts no liability for its use and urges firms to consult their legal advisers.