The International Trade and Forfaiting Association (ITFA) has announced that it will provide its members with access to an industry framework for open account distribution.
HSBC developed the Master Account Receivables Assignment Agreement (MARA) template in collaboration with law firm Dentons in London in 2018. Since then, the framework has been in use with positive market feedback.
As the template becomes available to a broader spectrum of market participants – including ITFA’s 320 members across 50 countries – open account assets will be distributed more efficiently and consistently.
ITFA – a trade association for firms engaged in global trade, forfaiting, supply chain, and receivables financing – is encouraging its banking members to adopt the agreement as an industry standard and is endorsing it for both receivables and supply chain finance transactions.
Paul Coles, ITFA board member and chair of the market practice committee, said: “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 standardised solution.
“By promoting the MARA as the recommended template for participation in these types of transactions, ITFA aims to establish a consistent industry-wide practice. This initiative demonstrates our commitment to fostering industry best practices.”
Governed by English law and based on the 2018 BAFT Master Participation Agreement, the MARA provides a structured framework for the funded distribution of receivables and supply chain finance transactions under an assignment structure.
Ian Clements, partner at Dentons, said: “Participants receive an equitable assignment – namely, beneficial interest in the receivable without notifying the buyer – upon payment. This assignment can become a legal one in specific circumstances.
“These provisions ensure a seamless transfer of interests from seller to participant, addressing concerns over counterparty credit risk.”
HSBC’s use of the template has been well-received by its peers and law firms.
Bhriguraj Singh, chief product officer at HSBC Global Trade and Receivables Finance said: “As a two-way agreement with balanced provisions, the MARA has allowed HSBC to participate and distribute a range of trade finance assets, striking a balance between protecting the interests of investors and originators.”
The MARA’s benefits include reduced legal costs, enhanced efficiency, consistency, and streamlined negotiations among banks. It accommodates both committed and uncommitted participation and one-off or recurring sell-downs.
