Financial Collateral in the Netherlands, England and under the EU Collateral Directive

Journal of International Banking Law and Regulation, Vol. 24, p. 388, 2009

Ticom Working Paper on Comparative and Transnational Law No. 2008/11

55 Pages Posted: 20 Oct 2008 Last revised: 7 Jul 2009

See all articles by Reinout M. Wibier

Reinout M. Wibier

Tilburg Law School; Tilburg University; European Banking Center

Abstract

This article describes how security can be taken over financial collateral under Dutch and under English law. The definition of financial collateral in the EU Collateral Directive is used for the purpose of this article and this Directive has a prominent position in this article. Dutch law is compared to English law as the dominant law in the field of financial collateral arrangements. This dominance is a result of the dominance of the London capital-markets and the flexibility of English law for creating security rights. In relation to the Collateral Directive this article shows that it fails to address one of the most important aspects of financial collateral arrangements: the recognition of collateral arrangements governed by foreign law. It is argued that the Directive's approach of introducing minimum standards for substantive law does not suffice to achieve the Directive's main objectives.

This article also introduces entirely new ways of dealing with financial collateral arrangements by introducing a new contractual approach. This contractual approach could be relevant for any jurisdiction where the rights of an accountholder against the bank can be qualified as contractual. This is true for the Netherland and (probably) England and is likely to be true for many more jurisdictions, in light of the definition of cash used in the Collateral Directive: 'money credited to an account in any currency, or similar claims for the repayment of money, such as money market deposits'. The fact that money credited to an account is viewed as a claim for repayment by the EU-legislature shows that a contractual approach of using cash deposits as collateral may have enormous potential. Finally, the contractual approach is tested in relation to collateral which takes the form of securities held through intermediaries. Although the approach would be less straightforward than for cash collateral, it also offers new opportunities for solving problems in this respect.

Keywords: security, financial collateral, collateral, collateral directive, cash collateral, securities collateral, charge-backs, charges

Suggested Citation

Wibier, Reinout M., Financial Collateral in the Netherlands, England and under the EU Collateral Directive. Journal of International Banking Law and Regulation, Vol. 24, p. 388, 2009; Ticom Working Paper on Comparative and Transnational Law No. 2008/11. Available at SSRN: https://ssrn.com/abstract=1287095

Reinout M. Wibier (Contact Author)

Tilburg Law School ( email )

Tilburg, 5000 LE
Netherlands

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC 5000 LE
Netherlands

European Banking Center ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

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