Financial Collateral Directive adopted

United Kingdom
21/05/2002
Download PDF

Law-Now has been following the progress of the EU draft directive on Financial Collateral Arrangements since its introduction in March 2001 (5 October 2001 and 18 March 2002).

This Directive, which will create a clear and uniform EU legal framework to limit credit risk in financial transactions through the provision of securities and cash as collateral, has now been definitively approved by the European Parliament. The approval was given on 15 May and the Directive is due to be implemented by Member States around the end of 2003.

At present, market operators in the EU face fifteen different legal regimes for the provision of collateral, the property (such as securities) provided by a borrower to minimise the risk of financial loss to the lender in the event of the borrower failing to meet their financial obligations to the lender. That diversity creates uncertainty as to the effectiveness of collateral as protection in cross-border transactions. The Directive is an important step in improving the competitiveness of the economy of the EU: the total value of outstanding contracts on the market for repurchase agreements ("repos") alone is estimated to be worth around 2 trillion euros.

Search Filters

Advanced Search

Related content