Act No. 408 / 2010 Coll.
Financial collateral law
Valid
Law
Effective from 01.01.2011
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408
THE LAW
of 9 December 2010
on financial collateral
Parliament has decided on this law of the Czech Republic:
BASIC PROVISIONS
Subject matter
This law implements the relevant European Unionprovisions (1) and regulates the procedure for securing claims under a contract whereby financial collateral is negotiated, persons authorised to negotiate financial collateral, their rights and obligations and certain other issues related to financial collateral.
Definition of certain terms
This law means:
(a) a claim of a financial nature on contracts involving funds, investment vehicles, greenhouse gas emission allowances (2) or commodities (3), as well as rights and claims relating thereto;
(b) repos the sale of financial instruments with the simultaneous purchase and purchase of financial instruments with the simultaneous resale;
(c) an investment security, a collective investment security or an MMF;
(d) a claim for payment of money a claim for payment of funds from an account in Czech or foreign currency or a similar claim for payment of funds;
(e) a credit claim on a loan, a loan or a comparable obligation to return funds deposited or provided in Czech or foreign currency.
Purpose of financial collateral
Financial collateral shall be used, under the conditions laid down in this Act, to secure a financial claim in the event of a default on its performance, or any other fact specified in the contract negotiating the financial collateral or agreed in the context of the final offsetting (4), whereby the beneficiary's right to satisfy the financial collateral is not subject to restrictions otherwise arising from the general arrangements for the lien and transfer of assets in the legal sense (hereinafter referred to as "the case ') for the benefit of the creditor.
Legal nature of the financial collateral
(1) Financial collateral has the character of a lien on financial collateral or a transfer of financial collateral for the benefit of its beneficiary.
(2) The transfer of financial collateral usually takes place on the basis of a repurchase agreement after the fulfilment of the obligation; in the case of financial instruments, also in the context of repurchase agreements. Where the nature of financial collateral so permits and in accordance with the arrangement of the Parties, the transfer of ownership of financial collateral to its beneficiaries shall take place.
FINANCIAL INSURANCE
SUBJECT MATTER OF FINANCIAL INSURANCE, FINANCE BACKGROUND AND PERSONS AUTHORIZED TO CONDUCT FINANCIAL INSURANCE
Financial collateral
(1) Financial collateral shall be subject to financial collateral, which may only be:
(a) the financial instrument;
(b) a separately transferable right otherwise linked to a financial instrument;
(c) the right resulting from the registration of a financial instrument in the register and enabling the authorised person, directly or indirectly, to dispose of the financial instrument in at least a similar manner to the authorised holder;
(d) funds credited to the account in Czech or foreign currency;
(e) a claim for payment of money; or
(f) a credit claim where the creditor is a person referred to in Article 7 (1) (a), (b) or (t) or in Article 7 (2) (d), or a foreign person having a similar activity to one of the persons referred to in Article 7 (1) (a) or (b).
(2) The financial collateral may also be the financial instrument or funds credited to an account to which the provider of such collateral will acquire ownership in the future, the right referred to in paragraph 1 (b). (b) or (c) that is incurred by the provider of such collateral only in the future, or a claim for payment of money or a credit claim that is incurred by the provider of financial collateral only in the future.
(3) Financial collateral may be determined individually or by other means so that it can be identified at any time during the period of financial collateral, for example as a set of items referred to in paragraph 1, the composition of which may vary over time.
(4) A claim on a consumer credit or similar credit under a foreign law may be financial collateral only if the beneficiary and his provider are a bank, a savings and credit cooperative or a foreign person with similar activities as a bank or a savings and credit cooperative, or if the recipient or that provider is the person referred to in points (d) to (f) of Article 7 (2).
(5) Where the provider of financial collateral (hereinafter referred to as the provider) is a natural person referred to in Article 7 (4), financial collateral may be only funds and financial instruments held by the recipient of financial collateral (hereinafter referred to as the beneficiary) for the purpose of providing the investment service, and funds and financial instruments acquired for those values for the provider, and may not be funds which the beneficiary, being a bank or a foreign person with a similar activity as the bank, accounts for as deposits.
Financial claim
(1) Only a claim of a financial nature, including its accessories, can be secured through financial collateral, and it is not relevant whether it is a claim for a provider or another person.
(2) Financial collateral may be negotiated for a claim contingent on or to be incurred only in the future.
(3) Financial collateral may also be negotiated for claims of a type arising from beneficiaries at a certain time or for various claims arising from beneficiaries for the same legal reason.
Persons authorised to negotiate financial collateral
(1) The provider and the recipient may only:
(a) the bank;
(b) savings and credit cooperatives;
(c) the person whose principal activities include:
1. the provision of consumer or other loans,
2. financial leasing;
3. the provision of payment services,
4. issuing electronic money;
5. the execution of the securitisation;
6. issuing guarantees or negotiating obligations to satisfy creditors up to a certain amount of money if a third party fails to fulfil a certain obligation or other conditions are met,
7. exchange activities,
8. the provision of consultancy activities on the structure of capital, industrial strategy and related issues, the conversion of companies or the transfer of business plants;
9. the management of the client's assets, if its investment instrument is part of it, on the basis of free consideration under the contractual arrangement; or
10. Storage or management of securities,
(d) a person whose principal activities include trading on his or her own account or on a foreign account;
1. payment instruments,
2. money market instruments;
3. foreign exchange values,
4. investment securities,
5.
6. futures the value of which relates to the rate or value of securities, foreign exchange rates, interest rate or interest rate returns, financial indices or financial quantitatively expressed indicators and which imply the right to settlement in cash or the right to supply the item to which they relate; or
7. financial differences,
(e) a central counterparty, settlement agent or clearing house under the law governing payment;
(f) securities dealer,
(g) the operator of the regulated market;
(h) a CCP, a settlement agent or a clearing house under the Capital Market Business Act;
(i) a legal person authorised to keep a register of investment vehicles;
(j) insurance undertaking;
(k) reinsurance undertaking;
(l) an investment company;
(m) a legal personality investment fund;
(n) pension fund;
(o) a legal person who trades on its own account in investment vehicles for the purpose of hedging from transactions in investment vehicles that are not financial instruments and that activity is one of its decisive activities;
(p) a legal person trading on its own account in commodities (3) or investment vehicles that are not financial instruments and that activity is one of its decisive activities;
(q) a legal person who is a market maker under the Capital Market Business Act,
(r) a credit rating agency;
(s) a foreign person with a similar activity to one of the persons referred to in points (a) to (r); and
(t) a legal person with a special status excluded from the scope of the Directive of the European Parliament and of the Council governing the activities of credit institutions (6).
(2) Furthermore, the provider and the recipient may:
(a) the State or Member State of the Federation;
(b) the territorial unit of the State;
(c) a public body or any other legal entity established by a law which provides for the administration and repayment of public or public debt or carries on business with such administration and repayment linked to such an activity;
(d) the central bank of a Member State of the European Union or of another State constituting the European Economic Area;
(e) the central bank of a State not referred to in (d) or the European Central Bank; and
(f) The World Bank, the International Monetary Fund, the European Investment Bank or other international financial institutions.
(3) Provided that the recipient or provider is one of the persons referred to in paragraph 1 or 2, the provider or the recipient may also:
(a) another legal person;
(b) a foreign person other than a natural person; and
(c) an undertaking natural person where, taking into account all circumstances, it is clear that the financial collateral is negotiated in connection with its business.
(4) The provider may also be another natural person if:
(a) the beneficiary is a bank authorised to provide investment services, a securities dealer or a foreign person having similar activities as a bank or a securities dealer and an investment service permit;
(b) taking into account all circumstances, it is clear that the financial collateral is negotiated in connection with the granting of a loan or loan to the provider as a customer in order to allow trade in the investment instrument in which the beneficiary is involved as a lending or lending agent;
(c) it has been expressly agreed that this is a financial security;
(d) the contract to which the financial collateral was agreed shall be in writing; and
(e) prior to its conclusion, the beneficiary has informed the provider of the main characteristics of the financial collateral regulation and of how the financial collateral regulation differs from the general lien and asset transfer arrangements for the benefit of the creditor.
(5) Where the recipient is a person referred to in point (a) of paragraph 4, the provider may not be its customer who is not a professional client under the law governing the capital market business, if it is about financial collateral which is the nature of the transfer of financial collateral to the beneficiary.
ARRANGEMENTS AND INCOME OF FINANCIAL INSURANCE
Settlement of financial collateral
(1) A contract between the provider and the beneficiary which provides financial collateral does not require written or other specific form; This is without prejudice to Article 7 (4) (d).
(2) Where legal conduct has the characteristics of financial collateral under this law, it is financial collateral, unless it has been agreed that it is not financial collateral; This is without prejudice to Article 7 (4) (c).
Establishment of financial collateral
(1) In order to obtain financial collateral, financial collateral shall be transferred to the beneficiary, credited to the designated account of the beneficiary or provided by other means enabling the beneficiary or the person acting on its behalf to hold it, otherwise legally or effectively control it, or the lien to it shall be entered in the account of investment vehicles for the benefit of the beneficiary.
(2) The fact that financial collateral has occurred must be demonstrated in writing, otherwise it is not financial collateral. The written form shall be retained if the creation of financial collateral is recorded by an entry which illustrates the creation of financial collateral and allows reproduction in an unchanged form.
List of credit claims
(1) In the case of credit claims, the condition of proof of the formation of financial collateral is also met by the transmission of a list of credit claims ("the list ') in writing to the beneficiary. The list captures credit claims that fall under financial collateral.
(2) Unless otherwise provided for in the contract, a credit claim entered on the list shall be deemed to have been transferred by the provider to the beneficiary with a deferral condition, that there is a delay in the performance of a secured financial claim or that there is any other fact specified in the contract to which the financial collateral is agreed or other fact agreed in the context of the final offsetting (4), with the legal effects of the transfer occurring only in respect of those credit claims which the beneficiary chooses to exercise the right of satisfaction from the list.
(3) As soon as the list is submitted to the recipient, the credit claim provider may not dispose of the list.
(4) The entry of a credit claim on the list shall not be required by the payee or the provider to notify the debtor whose obligation corresponds to that credit claim.
CREDIT RISK
Basic provisions
To be treated with pledged financial collateral, in particular to transfer it, to stop it, to use it or to allow it to be used by others, to acquire its fruits or benefits, the beneficiary may only, if so determined by the contract. The treatment of pledged financial collateral cannot be negotiated in respect of a credit claim; Article 16 is not affected.
Liability in the treatment of pledged financial collateral
If the beneficiary is treated with pledged financial collateral, its pledge rights to financial collateral shall cease.
Replacement of pledged financial collateral
(1) The beneficiary who has been treated with capped financial collateral shall replace it no later than the time when the secured claim becomes due, if they have been financial collateral
(a) funds of the same amount in the same currency;
(b) financial instruments by the same amount of fungible financial instruments and, where the financial collateral was the legal collateral referred to in Article 5 (1) (c), by the same amount of fungible rights; however, the contract to which the financial collateral was agreed in such cases may determine under which conditions it will be replaced by another item; and
(c) separately transferable rights otherwise linked to the financial instrument by the arrangement.
The suspended financial collateral to which the beneficiary has been treated may only be replaced by an item which may be financial collateral.
(2) If the contract so determines, the beneficiary who treated the financial collateral stopped, instead of replacing it in accordance with paragraph 1, may include his claim secured by the financial collateral that is due, including in the context of its inclusion in the final offsetting 4) against the value of the financial collateral.
(3) Where the performance of reciprocal claims by the beneficiary and the provider of the same type is not possible, the netting referred to in paragraph 2 shall be permitted if, before netting the reciprocal claims for their valuation and a subsequent change in the content of the corresponding liabilities to them, the cash claims in the same currency and at the amount determined under that valuation correspond to the new mutual obligations; Unless otherwise agreed, it shall be valued in a manner consistent with the practice of the relevant financial market.
(4) The treatment or replacement of suspended financial collateral referred to in paragraph 1 shall not affect the formation and duration of financial collateral.
(5) If the pledged financial collateral is to be replaced in accordance with paragraph 1 of the case, the lien of the beneficiary shall be established to the same extent as the case to which the financial collateral was replaced.
EXCHANGE OF FUNDED FINANCIAL COLLATERAL, LIMITATION OF THE SCOPE OF BASIS RIGHTS TO HIM, RETURNING HIS PART AND IMPLEMENTATION OF THE INSURANCE
(1) The contract may determine that the provider has the right to:
(a) exchange the financial collateral provided for other financial collateral of comparable value;
(b) require the repayment of part of the financial collateral or the limitation of the scope of the lien on financial collateral to an extent exceeding the amount of the secured claim.
(2) If the protection of the beneficiary's claim becomes inadequate, in particular as a result of a change in the value of financial collateral, the amount of the secured debt or the creditworthiness of the provider or debtor of the secured claim, the beneficiary may request its appropriate addition, unless otherwise specified by the contract.
(3) The exchange or return of part of the collateral or the limitation of the amount of the lien to financial collateral referred to in paragraph 1 as well as the addition of the collateral referred to in paragraph 2 shall not affect the occurrence and duration of the financial collateral.
SPECIAL CONTRACTING AGREEMENTS
Contractual arrangements for the purpose of securing other financial claims
If the contract so provides, the beneficiary shall be entitled to retain the financial collateral provided even after a commitment corresponding to a secured financial claim has been fulfilled for the purpose of securing other financial claims. The content of such an arrangement may also be an agreement between the parties that, for the period for which the beneficiary is entitled to retain the financial collateral provided, it is not obliged to replace the pledged financial collateral that it has handled under Paragraph 13.
Contractual arrangements in the event of repayment of debt
(1) Where a credit claim is included in financial collateral that has been stopped or transferred to the payee and is carried out in instalments, the borrower shall continue to pay the individual debt instalments, including accessories, for the duration of the financial collateral to the provider.
(2) However, the contract which negotiated the financial collateral may, in such cases, determine that the debtor fulfils the individual instalments of the debt, including the facilities, of the beneficiary for the agreed period of time; the provider is obliged to report on such an arrangement to the debtor. Until such an arrangement is notified by the provider to the debtor or until the beneficiary has demonstrated such an arrangement to the debtor, the debtor shall pay the individual instalments of the debt to the provider. Unless otherwise agreed, repayment of the debt received by the beneficiary shall be treated as a supplement to the collateral.
(3) On expiry of the period during which the debtor was to pay the individual instalments of the debt, including the accessories, to the beneficiary, the debtor shall report to the debtor. Until such a fact is notified to the debtor by the beneficiary or until the provider has proved that fact to the debtor, the debtor shall continue to pay the individual instalments of the debt to the beneficiary.
EXERCISE OF THE RIGHTS TO COLLECTION FROM FINANCIAL COLLATERAL
Method of exercising the right to be satisfied by financial collateral
(1) If there is a delay in the performance of a secured financial claim, or if there is another element specified in the contract for which the financial collateral is agreed or agreed under the final offsetting (4), the beneficiary may be satisfied in the manner agreed with the provider; in other cases they shall be satisfied, having regard to the legal nature of the financial collateral;
(a) the proceeds of the redemption of financial collateral; where the manner in which the contract is acquired is not determined, it shall be made in a manner consistent with the practice in the relevant financial market; or
(b) by offsetting the value of financial collateral against its claim against the provider, including in the context of the inclusion of such value in the final offsetting (4).
(2) The retention of financial collateral may be satisfied by the beneficiary only if this method has been agreed and if the retention price or the method of determining the price has been agreed at the same time, the method of determining the price must correspond to the practice of the relevant financial market.
(3) Where only certain credit claims entered on the list have been collected by the beneficiary to satisfy a secured financial claim and the remaining credit claims no longer provide for any other financial claim, the list shall be deleted; Paragraph 15 is not affected.
(4) Where, as a result of the exercise of the beneficiary's right of satisfaction from financial collateral, a claim for payment of money or a credit claim is acquired, the provider shall report this fact to the debtor whose liability corresponds to such claim. If the debtor is informed of this fact by the recipient who has acquired the claim, the debtor shall be entitled to require that he can prove the acquisition of the claim.
Use of other legislation to exercise the right to be satisfied by financial collateral
Unless the contract provides otherwise, the law shall not apply to the exercise of the right of satisfaction from financial collateral, unless it provides that:
(a) the beneficiary has previously notified the provider or other person of the redemption of the financial collateral;
(b) the exercise of the right of satisfaction from financial collateral has been authorised by a court, administrative authority or other person;
(c) financial collateral has been monetized in a public auction or otherwise specified; or
(d) a certain period has elapsed before exercising the right to be satisfied with financial collateral.
PROVISIONS COMMON
Effects of the acquisition of a debt by the beneficiary on the debtor's liability
Where the beneficiary proves to the debtor whose obligation corresponds to a credit claim or a claim for the payment of the money of the acquisition of that claim, the debtor shall be released from the obligation only through the performance of the beneficiary. It is sufficient for the beneficiary to prove to the debtor that the credit claim has been entered on the list.
Surrender of right of set-off
A debtor whose obligation corresponds to a given credit claim where the creditor is a person referred to in Article 7 (1) (a), (b) or (t) or in Article 7 (2) (d), or a foreign person having a similar activity to that of one of the persons referred to in Article 7 (1) (a) or (b), may declare that he has waived the right to set off any claim he has or will have vis-à-vis the creditor and any subsequent creditor who receives the credit claim by transfer or for any other legal reason; the debtor may waive that right before the right to set-off is established.
Elimination of the effects of certain acts of a court or administrative authority
(1) A decision or other act of a court or administrative authority which affects the rights of third parties and has been made in order to maintain or restore the financial situation of the provider or beneficiary, or, where appropriate, to prohibit or restrict the execution of certain transactions or the transfer of funds by the provider or beneficiary (7), shall not affect the exercise of rights and obligations arising from financial collateral arrangements under the conditions laid down by this law or comparable conditions of foreign law, in particular the right of the beneficiary to obtain satisfaction from financial collateral, provided that the financial collateral has been agreed and arose before the adoption of a decision or other act. This shall also apply where the financial collateral was agreed or arose on the date of the decision or the execution of another action by a court or administrative authority, but the financial collateral was agreed or arose only after that fact occurred, unless the beneficiary knew or had and could have known about such fact.
(2) Paragraph 1 shall not apply to the effects of acts relating to the initiation of insolvency proceedings, the execution of decisions, execution procedures, entry into liquidation or the introduction of forced administration of the provider or the recipient, or the application of resolution measures or write-offs and conversion of depreciable capital instruments under the law governing recovery and resolution in the financial market or comparable foreign legislation towards the provider or the beneficiary; the exclusion of these effects is governed by other laws. In addition, paragraph 1 shall not apply to the effects of acts relating to the application of measures under Section 3 of Chapter III of Title V or Chapter IV of Title V of Regulation (EU) 2021 / 238 of the European Parliament and of the Council.
Relationship with certain provisions of civil law
The legal effects of the transfer of financial collateral shall be governed by the provisions of this Act and within its limits by financial collateral arrangements, regardless of the general arrangements for the lien and the transfer of cases to the benefit of the creditor. The provisions of this law also govern legal relations related to the use of the list and the right to waive the right of set-off, regardless of general legislation. The other provisions of the Civil Code governing the conditions for the effective disposal or cessation of the claim against the debtor and the retention of objections to the claim which the debtor may have exercised at the time of its disposal shall remain without prejudice.
Protection of the debtor's legal status in the event of a credit claim included in financial collateral
The inclusion of a credit claim in financial collateral shall not result in a deterioration of the legal status of the debtor whose liability corresponds to that credit claim.
TRANSITIONAL AND EFFECTIVE PROVISIONS
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Regulation Information
| Citation | Act No. 408 / 2010 Coll., on Financial Security |
|---|---|
| Regulation Type | Law |
| Author | - |
| Collection | Code of Laws |
| Date of Promulgation | 29.12.2010 |
|---|---|
| Effective from | 01.01.2011 |
| Effective until | - |
| Status | Valid |
The regulation text is for informational purposes only.
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