During the last decade, negative interest rates have raised concerns in the European debt capital markets landscape. Prospectuses often allow the issuance of debt securities for which the interest rate is linked to indexes that are or can become negative (e.g. LIBOR, EURIBOR).

In response to this phenomenon, the Autorité des marchés financiers ("AMF") published on 27 June 2017 guidelines on the information that should be disclosed to investors in prospectuses allowing for the issuance of floating-rate bonds, by distinguishing three situations:

  • Where a prospectus formally excludes the application of a negative interest rate by providing for a zero floor rate, no particular information is required;
  • Where a prospectus expressly provides for a negative interest rate or the possibility of such a rate, the AMF requires the insertion of implementing instructions including the method of calculation and charging of the negative interest and the insertion of a corresponding risk factor; and
  • Where a negative interest rate could be applicable due to the trend in the applicable indexes and a prospectus is silent as to the possibility of applying a negative interest rate and does not contain a zero floor rate provision, the AMF now requires issuers to indicate in the prospectuses whether they intend to apply a zero floor rate or a negative interest rate.

Through this recent position, the French regulator does not approve or condemn negative interest rates but rather requires for an adequate level of disclosure and certainty to market participants in the current low or negative interest rate environment.

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