25 March 2002

Rapporteur recommends to adopt Common Position unchanged

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The rapporteur of the European Parliament on Financial Collateral Arrangements, Perez Royo, suggested in his draft recommendation for the second reading not to present any amendments to the Council Common Position, in order not to delay the definitive adoption of the Directive. Although there are indeed disturbing elements from a Single Market point of view, their negative effects will be limited.

Among others the Council accepted to extend the scope of the Directive to make sure ensures that not only financial institutions will be able to benefit from the risk- mitigation mechanisms which is of particular relevance in view of Basel II, where the risk weighting of individual exposures will be decisive for the calculation of prudential capital requirements.

The thresholds for the inclusion of legal persons into the scope of the directive no longer exist, as long as the counterpart is a public authority, a central bank (including the BIS and multilateral development banks), a financial institution or a central counterparty, a settlement agent or a clearing house.

The Council also accepted the request for clarification with respect to the definition of 'provision' of financial collateral. The requirement for financial collateral arrangements to be signed by the collateral provider (including electronic signature) has been dropped.

The two issues the rapporteur criticizes are related to the establishment of the two opting out provisions for Member States concerning the inclusion of non-financial entities into the scope of the directive as well as the right of appropriation for financial collateral.

See draft recommendation

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