In March 2013 the Loan Market Association (LMA) announced to its members that it would no longer be publishing revised forms of its Mandatory Costs Schedule to take account of changes to the UK regulatory fee structure and on 1 April 2013 the recommended form of that schedule was withdrawn from its website. Apparently agent banks had been finding that the calculation of Mandatory Costs under the LMA's formula was becoming increasingly complex given the broad mix of lenders in syndicates.
Provisions in financing agreements usually allow for the parties to agree to changes in the calculation of Mandatory Costs so existing agreements can be dealt with as necessary between the parties to them.
For agreements put in place since 1 April 2013, a number of options are available – some suggested by the LMA for syndicated lending. In bilateral loans, Mandatory Costs are often broadly defined as being determined by the lender (without reference to a formula) in any event. Alternatively lenders have the option of not charging for them separately, but either adding them to the interest rate margin or absorbing them.
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