Yeowart and Parsons on the Law of Financial Collateral
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Yeowart and Parsons on the Law of Financial Collateral

  • Elgar Financial Law and Practice series

Geoffrey Yeowart, Robin Parsons, Edward Murray and Hamish Patrick

This book is the first of its kind to offer a systematic examination of the whole law relating to financial collateral. It does so in two parts. First, it explains the law created by the Financial Collateral Arrangements (No 2) Regulations 2003, the Directive it implemented and related legislation. Second, it examines how financial collateral is used in practice in a range of different markets. It will be an essential reference point for all legal practitioners operating in financial markets.
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Chapter 7: SECURITY FINANCIAL COLLATERAL ARRANGEMENTS

Geoffrey Yeowart, Robin Parsons, Edward Murray and Hamish Patrick

Extract

‘Financial collateral arrangements’ are either ‘title transfer financial collateral arrangements’ or ‘security financial collateral arrangements’. This chapter deals with the second of these types of arrangements. A ‘security financial collateral arrangement’ is defined by the Financial Collateral Arrangements (No. 2) Regulations 2003 (‘FCARs’) as: … an agreement or arrangement, evidenced in writing, where – (a) the purpose of the agreement or arrangement is to secure the relevant financial obligations owed to the collateral-taker; (b) the collateral-provider creates or there arises a security interest in financial collateral to secure those obligations; (c) 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 his behalf; any right of the collateral-provider to substitute financial collateral of the same or greater value or withdraw excess financial collateral or to collect the proceeds of credit claims until further notice shall no prevent the financial collateral being in the possession or under the control of the collateral-taker; and (d) the collateral-provider and the collateral-taker are both non-natural persons. As previously explained, there are important differences between a security financial collateral arrangement and a title transfer financial collateral arrangement. Under the laws of most jurisdictions, there are cumbersome rules governing the creation and perfection of a security interest (particularly if the security interest is non-possessory).

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