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Promoting Consistency in Financial Distribution
The International Trade and Forfaiting Association (ITFA) has announced the adoption of the Master Account Receivables Assignment Agreement (MARA) template, developed by HSBC in collaboration with the law firm Dentons in 2018, as a standard for its members.
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Standardizing Industry Practice
In a statement, ITFA announced that it “now encourages its banking members to adopt the agreement as an industry standard, recommending it for both receivables finance and supply chain finance operations.”
A Structured Framework for Funded Distribution
The adoption of an existing standard by ITFA is significant: with 320 members among banks and financial institutions in over 50 countries, the organization is well-placed to bring order to what has been a patchy legal and regulatory landscape.
Enhancing Legal and Financial Security
“The lack of an established framework agreement to date has led to some inconsistencies in the distribution of open account assets, underscoring the need for a standardized solution,” said Paul Coles, ITFA board member and chair of the Market Practice Committee.
Facilitating Transactions and Reducing Risks
The MARA, governed by English law and based on the 2018 BAFT Master Participation Agreement, provides a structured framework for the funded distribution of receivables and supply chain finance transactions under an assignment structure.
Industry Recognition and Tangible Benefits
“Participants receive an equitable assignment – namely, beneficial interest in the receivable without notifying the buyer – upon payment. This assignment can become legal in specific circumstances. These provisions ensure a seamless transfer of interests from seller to participant, addressing concerns over counterparty credit risk,” said Ian Clements, partner at Dentons.
Conclusion: Elevating Industry Standards
The use of the template by HSBC has been well-received by the industry, including other law firms and peer banks. The benefits of MARA include reduced legal costs, enhanced efficiency, consistency, and streamlined negotiations among banks. Through this initiative, ITFA and its members are contributing to raising industry practices to new heights of consistency and efficiency.
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https://itfa.org/itfa-introduces-mara-as-industry-standard-framework-for-open-account-distribution/
