Market disruption clauses
Authors: Long, Caroline; Jack, Ian; Cain, Brian
Source: Law and Financial Markets Review, Volume 3, Number 1, January 2009 , pp. 45-48(4)
Publisher: Hart Publishing
Abstract:As the credit crisis has intensified over the last few months, lenders have found it increasingly difficult to access funding for their loan book on the interbank market. Liquidity in this market is at the lowest level for decades. If funding is available to a lender, that lender is likely to be paying a much higher price for it. Obtaining funds at LIBOR simply is not possible for some market participants. This article looks at one possible mechanism a lender may be able to use to recover the actual cost of funds if it is accessing the market at a rate that is above LIBOR. It discusses the issues we believe will be of most interest to all market participants – agents, borrowers and lenders – and goes on to to describe some points where parties may wish to focus their negotiating efforts to balance the impact a lender's triggering the contractual mechanism for increasing the margin might have on a borrower.
Document Type: Research Article
Publication date: January 2009
- Law and Financial Markets Review is a new, independent, English language journal devoted to providing high quality information, comment and analysis for lawyers specialising in banking and financial market issues and to others with interests in legal and regulatory developments affecting the financial markets. Published bi-monthly LFMR contains articles written by leading experts providing a forum for practical guidance on, as well as reflective and topical analysis of, all major jurisdictions, with a particular focus on the interaction between the law and market practice and behaviour.
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