a. Legal Certainty
CA-5.8.122
The legal mechanism by which collateral is given must be robust and ensure that the lender has clear rights over the proceeds from the collateral.
Apr 08CA-5.8.123
Banks must take all steps necessary to fulfill local requirements in respect of the enforceability of security interest, e.g. by registering a security interest with a registrar. There should be a framework that allows the potential lender to have a perfected first priority claim over the collateral.
Apr 08CA-5.8.124
All documentation used in collateralised transactions must be binding on all parties and legally enforceable in all relevant jurisdictions. Banks must have conducted sufficient legal review to verify this and have a well founded legal basis to reach this conclusion, and undertake such further review as necessary to ensure continuing enforceability.
Apr 08CA-5.8.125
The collateral arrangements must be properly documented, with a clear and robust procedure for the timely collection of collateral proceeds. Banks' procedures should ensure that any legal conditions required for declaring the default of the customer and timely collection of collateral are observed. In the event of the obligor's financial distress or default, the bank must have legal authority to sell or assign the receivables to other parties without consent of the receivables' obligors.
Apr 08
