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Financial Collateral Directive: Difference between revisions
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The directive was designed to simplify and universalise the process of taking security in financial contracts across the EU – for one thing it would mean that any formal registration or perfection requirements which otherwise would be required (registering the security interest with the registrar of companies for example) do not apply. | The directive was designed to simplify and universalise the process of taking security in financial contracts across the EU – for one thing it would mean that any formal registration or perfection requirements which otherwise would be required (registering the security interest with the registrar of companies for example) do not apply. | ||
'''Contractual Provisions''': The {{tag|Financial Collateral Directive}} is a little more vague about what counts as a {{tag|financial collateral arrangement}} than is ideal, so you may see contractual stipulations that both parties agree their arrangement is intended to be one. | '''Contractual Provisions''': The {{tag|Financial Collateral Directive}} is a little more vague about what counts as a {{tag|financial collateral arrangement}} than is ideal — | ||
{{quote| | |||
“'''financial collateral arrangement'''” means a title transfer financial collateral arrangement or a security financial collateral arrangement, whether or not these are covered by a master agreement or general terms and conditions;}} | |||
— so you may see contractual stipulations that both parties agree their arrangement is intended to be one. | |||
While this is no doubt intended to help, given that, in the final analysis, the person likely to challenge that analysis would be a competing creditor, and the person who would be arbitrating on it would be a liquidqator, if an arrangement were not formally within the definition, then the fact that the parties agreed it was intended to be probably wouldn’t. | While this is no doubt intended to help, given that, in the final analysis, the person likely to challenge that analysis would be a competing creditor, and the person who would be arbitrating on it would be a liquidqator, if an arrangement were not formally within the definition, then the fact that the parties agreed it was intended to be probably wouldn’t. | ||
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===What it does=== | ===What it does=== | ||
The [[FCD]] divides [[financial collateral arrangement|financial collateral arrangements]] into two mutually exclusive categories: | The [[FCD]] divides [[financial collateral arrangement|financial collateral arrangements]] into two mutually exclusive categories: | ||
=====Title transfer financial collateral arrangements===== | |||
Under a [[TTCA]] a [[collateral-provider]] transfers full ownership of the [[financial collateral]] to the [[collateral-taker]] on terms that It will transfer back [[equivalent]] assetswhen the obligations are discharged | |||
{{quote| | {{quote| | ||
“'''financial collateral arrangement'''” means a | “'''title transfer financial collateral arrangement'''” means an agreement or arrangement, including a repurchase agreement, evidenced in writing, where— | ||
{{l3}}the purpose of the agreement or arrangement is to secure or otherwise cover the relevant financial obligations owed to the collateral-taker;<li> | |||
the collateral-provider transfers legal and beneficial ownership in financial collateral to a collateral-taker on terms that when the relevant financial obligations are discharged the collateral-taker must transfer legal and beneficial ownership of equivalent financial collateral to the collateral-provider; and <li> | |||
the collateral-provider and the collateral-taker are both non-natural persons;</ol>}} | |||
and | |||
=====Security financial collateral arrangements===== | |||
Under an [[SFCA]] the collateral provider provides [[financial collateral]] by way of security but retains full ownership of the financial collateral remains with the collateral-provider. | |||
{{quote| | |||
“'''security financial collateral arrangement'''” means an agreement or arrangement, evidenced in writing, where— | “'''security financial collateral arrangement'''” means an agreement or arrangement, evidenced in writing, where— | ||
{{L3}}the purpose of the agreement or arrangement is to secure the relevant financial obligations owed to the collateral-taker;<li> | {{L3}}the purpose of the agreement or arrangement is to secure the relevant financial obligations owed to the collateral-taker;<li> | ||
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the financial collateral is delivered, transferred, held, registered or otherwise designated so as to be in the possession or under the control of the collateral-taker or a person acting on its behalf; any right of the collateral-provider to substitute equivalent financial collateral or withdraw excess financial collateral shall not prevent the financial collateral being in the possession or under the control of the collateral-taker; and <li> | the financial collateral is delivered, transferred, held, registered or otherwise designated so as to be in the possession or under the control of the collateral-taker or a person acting on its behalf; any right of the collateral-provider to substitute equivalent financial collateral or withdraw excess financial collateral shall not prevent the financial collateral being in the possession or under the control of the collateral-taker; and <li> | ||
the collateral-provider and the collateral-taker are both non-natural persons; </ol> | the collateral-provider and the collateral-taker are both non-natural persons; </ol>}} | ||
===[[Appropriation]]=== | ===[[Appropriation]]=== | ||