Barclays using FSMA Part VII for Brexit

Wednesday’s report that Barclays is to use a Part VII FSMA transfer to shift its deposit taking, derivatives (ISDA, GMRA, etc) and corporate and investment banking business with EU27 parties to Barclays Bank Ireland will not be a workable precedent for many, because FSMA section 106(1)(a) requires part of the business being transferred to include the accepting of deposits. Assuming the Central Bank of Ireland approves BBI’s licence extension application, it will permit a smooth transfer without the need for the manual novation of the relevant contracts.  It will include contracts under not only English law but also the laws of Germany, France, Spain and Italy because, presumably, those countries recognise the effectiveness of a Part VII transfer. It will not include contracts governed by the laws of NY, Holland and Portugal because, presumably, those don’t. Barclays’ summary says that such a transfer will not bring legacy (pre-EMIR) contracts within the scope of EMIR’s clearing and margining requirements, which novations might. The loan business will be transferred too, but using existing loan agreement transferability options. The first of the two necessary court hearings is due in January 2019. A legally novel aspect of this led to a High Court judgment on Monday.  The business being transferred was conducted (in an interwoven way) by two Barclays’ entities, and one of them did not do deposit-taking. Could the Part VII order cover both entities?  Zacaroli J decided on an ex parte application that it could, because essentially it was one seamless business.