Brussels, 09/01/2007 (Agence Europe) - On Tuesday 9 January, the Commission presented its evaluation report on the implementation of directive 2002/47/EC on financial collateral arrangements. “The overall impression is that the (directive) is functioning well”, although it is still too soon to give a final assessment of its impact, it says in the report's conclusions. In particular, European legislation has made the use of financial collateral and the enforcement of collateral obligations simpler. Most Member States transposed the directive after the deadline for transposition (end of December 2003), with nine only doing so in 2005.
The Commission proposes to widen the scope of directive 2002/47/EC to include certain credit claims which, as of 1 January 2007, will be eligible for Eurosystem credit operations. So private credit claims could be used as financial collateral, depending on how quickly specific technical problems can be resolved. Three Member States, France, the Czech Republic and Sweden, have already extended to private credit claims the list of assets which can be used as collateral because of the directive. The ECB Governing Council decided in 2004 to accept private credit claims as a category of collateral eligible for Eurosystem credit operations as of 1 January 2007.
The report recommends, too, maintaining opt-out provisions relating to the scope of the directive and not acting on utilisation. It says that the Commission will give further study to improving the European legislative framework on netting.
Financial collateral means assets provided by a borrower to a lender, in order to minimise the risk of financial loss to the lender in the event of the borrower defaulting on its financial obligations to the lender. Most often provided in the form of cash or securities, collateral is increasingly used in all types of transaction, including capital markets, bank treasury and funding, payment and clearing systems and general bank lending. (mb)