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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 cross-border 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 Great 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, including following 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 opportunity was also taken to clarify certain terms and conditions.

The GMRA consists of a pre-printed master agreement that contains standard provisions, which are generic to the market in standard repo, and Annex I, which lists specific choices that need to be made by the parties to operationalize the agreement (eg fixing 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 character of the business relationship between them. 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 simple high-quality fixed-income securities that take the form of repurchase transactions between principals under the law of England and Wales. To apply the GMRA to repos of equities, repos by or with an agent, or repos in the form of buy/sell-backs, it is necessary to amend the master agreement. This can be done by signing the standard Equity, 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 and Wales, there are also a number of country annexes. In addition, the parties can add special supplementary terms or conditions to Annex I of the GMRA.

To ensure that the GMRA remains effective, the ICMA commissions legal opinions on behalf of its members every year on the enforceability of the whole agreement, the effectiveness of title transfer, its mechanism for close-out netting in insolvency and other provisions in over 65 jurisdictions for transactions with commercial banks and investment firms, and in many countries, transactions with various types of non-bank financial institution. If parties agree material amendments to the GMRA, they will need to see their own supplementary legal opinions to ensure that their amendments have not affected the legality, validity and enforceability of the contract.

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 and close-out netting in the calculation of regulatory capital requirements and large exposures.


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