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. While this is no doubt intended to help, given that in the final analysis the person who would challenge that is a competing third party creditor and the person who would be arbitrating on it was 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 help.
'''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.  


'''{{tag|Title transfer collateral arrangement}}s''': TTCAs are not security arrangements of any kind, do not therefore require registration, and therefore the Financial Collateral Directive doesn't really apply to them. But contrast differing styles of agreement that cover the same product:
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.
 
===What it does===
The [[FCD]] divides [[financial collateral arrangement|financial collateral arrangements]] into two mutually exclusive categories:
*'''[[Title transfer financial collateral arrangement]]s''': 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; and
*'''[[Security financial collateral arrangements]]s''': 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.
 
===[[Title transfer collateral arrangement]]s===
'''{{tag|Title transfer collateral arrangement}}s''': [[TTCA]]s are not security arrangements of any kind, do not therefore require registration, and therefore the Financial Collateral Directive doesn't really apply to them. But contrast differing styles of agreement that cover the same product:
* a {{gmsla}} is a TTCA, so isn't in scope for the financial collateral regualtions;
* a {{gmsla}} is a TTCA, so isn't in scope for the financial collateral regualtions;
* a {{msla}} is a security interest arrangement, and so is in scope.
* a {{msla}} is a security interest arrangement, and so is in scope.


===Interpretation===
===Interpretation===

Revision as of 10:51, 14 December 2017

the Financial Collateral Directive (2002/47/EC (EUR Lex)) is a well-intended piece of EU Regulation that, by common consent, didn't quite achieve what it set out to, which was to introduce "a Community framework to reduce credit exposure in financial collateral arrangements. These common rules contribute to the effectiveness and integration of European financial markets, reducing credit losses and thereby stimulating cross-border transactions and competitiveness."

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 Financial Collateral Directive is a little more vague about what counts as a financial collateral arrangement than is ideal, 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.

What it does

The FCD divides financial collateral arrangements into two mutually exclusive categories:

Title transfer collateral arrangements

Title transfer collateral arrangements: TTCAs are not security arrangements of any kind, do not therefore require registration, and therefore the Financial Collateral Directive doesn't really apply to them. But contrast differing styles of agreement that cover the same product:

Interpretation

Helpful Clifford Chance article here

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