Lithuania: SORAINEN contributes to netting legislation

20.06.2011

On 18 June 2011 the Law Amending the Law on Financial Collateral Arrangements (the Law) was published in the Official Gazette. The Law comes into effect on 30 June 2011. Lithuania is the first Baltic State to introduce netting legislation.

The draft Law was prepared by the Ministry of Finance in cooperation with the Association of Lithuanian Banks and using technical assistance of the International Swaps and Derivatives Association (ISDA). The Association of Lithuanian Banks was advised by SORAINEN, partner Tomas Kontautas and senior associate Augustas Klezys.

The Law not only implements Directive 2009/44/EC but also, following the ISDA Model Netting Act, decreases systemic risk and creates more certainty in the derivatives trade by providing provisions for close-out netting under OTC derivative transactions.

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