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19. What is the GMRA?
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GMRA is the acronym for the Global Master Repurchase Agreement. It is a model legal agreement designed for parties transacting repos and is published by the International Capital Market Association (ICMA), which is the body representing the  bond and repo markets in Europe. The GMRA is the principal master agreement for cross-border repos globally, as well as for many domestic repo markets.

The GMRA was first published in 1992. It was updated in 1995 to incorporate lessons learned in the Baring Brothers crisis and, in 2000, to incorporate lessons from the Russian and Asian financial crises. The latest version was published in 2011. Although this version followed the global financial crisis that erupted in 2007, it was not the result of any material shortcomings exposed by the crisis. Indeed, the GMRA 2000 performed well during the crisis, including the Lehman Brothers default in 2008. Rather, the updating mainly reflected the desire to harmonise the GMRA more closely with other master agreements, including the Global Master Securities Lending Agreement (GMSLA) and the ISDA Master Agreement, and the need to reflect changes in market practice and general legal developments since 2000.

The GMRA consists of a pre-printed master agreement that contains standard provisions, which are generic to the market and should not need further negotiation by the parties, and Annex I, which lists specific choices that need to be made by the parties (eg minimum delivery periods) and provides somewhere to record supplemental terms and conditions, if the parties wish to customise the master agreement to reflect the special terms and conditions of the business relationship between the parties. The specific commercial terms of each transaction are recorded in confirmations, a model template for which is provided in Annex II of the GMRA.

The GMRA is designed for short-term repos of fixed-income European government bonds that take the form of repurchase agreements between principals under the law of England and Wales. To apply the GMRA to repos of equities or money market instruments, repos by or with an agent, or repos in the form of sell/buy-backs, it is necessary to amend the master agreement by signing the Equity, Bills of Exchange, Agency and Buy/Sell-Back Annexes, respectively. Other product annexes accommodate certain domestic securities (eg UK gilts). To adapt the master agreement to jurisdictions other than England, there are also a number of country annexes.

To ensure that the GMRA remains effective, the ICMA commissions legal opinions every year on the enforceability of the whole agreement, its transfer of title provisions and its mechanism for netting in insolvency in over 60 jurisdictions for transactions with banks and other companies, and in many countries, transactions with various types of non-bank financial institutions.

Regulators require repos to be documented under robust written legal agreements like the GMRA, supported by regularly updated legal opinions, as a condition of recognising the reduction of credit risk by collateral in the calculation of regulatory capital requirements.

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