Tag Archives: banking & finance update

B&F newsletter, spring 2011

FINANCIAL COLLATERAL ARRANGEMENTS IN THE BALTIC STATES

A financial collateral arrangement provides effective security to the creditor with minimal cost since it may be included in a master agreement or general terms and conditions without certification, registration, perfection or other assigned costs. The enforcement of financial collateral arrangements constitutes a significant advantage of this type of agreements over pledges and is in fact viewed as a major characteristic distinguishing it from agreements on pledge of cash collateral without a title transfer. The aim of a financial collateral arrangement is established in the preamble of Directive 2002/47/EC which provides that Member States should ensure the inapplicability of certain provisions of insolvency law to financial collateral arrangements. It follows that the protection of financial collateral arrangements in case of insolvency (bankruptcy and restructuring) is essential in this directive and the Member States should secure their enforceability. The right of the beneficiary of financial collateral to unilaterally realise the financial collateral in insolvency proceedings does not cease from the start of insolvency. Another difference in comparison with other creditors (including the creditor of an agreement on pledge of cash collateral) is the possibility to set off the monetary claim against the bankrupt undertaking.

Read full article