The Financial Markets Law Committee (FMLC) has sent a letter to HM Treasury regarding the meaning of “possession”, “control” and “excess financial collateral” under the Financial Collateral Arrangements (No. 2) Regulations 2003 (FCAR).
The letter follows the FMLC’s December 2012 paper, which highlighted certain issues of legal uncertainty in relation to the meanings of those terms in the FCAR and proposed amendments to address the issues, and provides further evidence which substantiates those issues and demonstrates the cumulative effect of such uncertainty on the different parts of the UK financial markets, including:
- impact on the UK security settlement system (CREST);
- legal enforceability;
- difficulties with the issue of English legal opinions;
- impact on the non-centrally cleared over-the-counter (OTC) derivatives market; and
- impact on the centrally cleared OTC derivatives market.
View Meaning of “possession”, “control” and “excess financial collateral” under the Financial Collateral Arrangements (No. 2) Regulations 2003 (“FCARs”), 15 April 2015