Appropriation

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A word about credit risk mitigation


Legal security: MortgagePledgeLienBailment
Equitable security: Chargefixedfloating | ABWOS | Equitable lien
Credit risk mitigation: Title transfer | Guarantee | Letter of credit | Netting
Friends and relations: Rehypothecation | Equivalent
Documents: 1994 ISDA CSA (NY law) | 1995 ISDA CSA | 1995 ISDA CSD (English law)
Regulation: LPA 1925 | Financial Collateral Regulations | LPMPA 1994

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Appropriation is a remedy created by the Financial Collateral Regulations the right to take an asset against a debt, as opposed to selling it:

“Where a legal or equitable mortgage is the security interest created or arising under a security financial collateral arrangement on terms that include a power for the collateral-taker to appropriate the collateral, the collateral-taker may exercise that power in accordance with the terms of the security financial collateral arrangement, without any order for foreclosure from the courts.”

Appropriation” is – helpfully, but typically – not defined, but the directive does require that the collateral taker has an agreed valuation method.

It might be useful in some cases, especially where encumbered assets are illiquid or not easily sold. But the problem becomes how one attaches a value to the appropriated asset. The less liquid it is, the more contentious the value is likely to be. The more liquid it is, the less need there is for a right of appropriation, since the collateral taker can just sell it in the market.

Also a thing in Luxembourg, apparently.

Not to be confused with cultural appropriation, a beautifully paradoxical concept that only libtards care about.

See also