EN ECB -PUBLIC 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 5 April  2013 
on financial collateral arrangements  
(CON/ 2013/24) 
 
Introduction and legal basis  
On 13 February 2013, the European Central Bank (ECB) received a request from the Ministry of Finance, 
the Economy and Inve stment of Malta for an opinion on draft regulations amending the Financial 
Collateral Arrangements Regulations  of 20041 (hereinafter the ‘ draft law’). 
The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and the second  and sixth indents of Article  2(1) of Council 
Decision  98/415/EC of 29 June 1998 on the consultation of the ECB by national authorities regarding 
draft legislative provisions2, as the draft law concern s means o f payment  and rules applicable to financial 
institutions insofar as they materially influence the stability of financial institutions and markets . In 
accordance with the first sentence of Article 17.5 of the Rules of Procedure of the ECB, the Governing 
Council has adopted this opinion. 
 
1.  Purpose of the draft law 
1.1 The Financial Collateral Arrangements Regulations (hereinafter the ‘ Regulations’), issued pursuant 
to Article 7 of  the Set -off and Netting on Insolvency Act3, transposed  Directive 200 2/47/EC of the 
European Parliament and of the Council of 6 June  2002 on financial collateral arrangements4 as 
well as Directive 2009/ 44/EC of the European Parliament and of the Council of 6 May  20095 
insofar as it amends Directive 2002/47/EC as regards linked syst ems and credit claims.  
1.2 The draft law amends the definition s of ‘credit claims ’, ‘instrument’ , ‘non-natural person’  and 
‘recognised jurisdiction’  in Section 2(1) of the Regulations . It also insert s a new provis ion in 
Section 2(2), providing for an  interpretation of ‘control ’ where  financial collateral is held by a third 
party . In addition, t he draft law  extends  the list in the Regulations of  who may constitute a 
                                                 
1    Legal Notice 177 of 2004 . 
2  OJ L 189, 3.7.1998, p. 42.  
3  Chapter 459 of the Laws of Malta.  
4  OJ L 168, 27.6.2002,  p. 43.  
5    OJ L 146, 10.6.2009, p. 37.  
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2 collateral taker and a collateral provider  to inclu de ‘a corporation or other legal person e stablished 
by statute ’, ‘non-natural persons ’ and ‘securiti sation vehicles ’.  
1.3 Furthermore, the draft law amends the existing notification requirements where credit claims are 
provided as collateral  as well as the provisions on the enforcement of financ ial collateral 
arrangements. Finally , it clarifies that in certain situations the Regulations shall prevail over the 
Companies Act (Investment Companies with Variable Share Capital) Regulations of 20066.  
 
2. General observations  
Subject to the specific observations on the points mentioned below, the ECB welcomes the amendments 
to the Regulations  and notes that they  generally constitute implementation  or clarification measures.  
 3.  Credit c laims  
3.1 The ECB notes the  proposed extension of the definition of ‘credit claim’ in Section 2(1) of the draft 
law, to include  ‘pecuniary claims due to a non- natural person, provided that the debtor of the 
claims granted as collateral is also a non -natural person ’. This amendment  goes beyond the 
definition of credit cla im set out in Directive 2002/47/EC , i.e. ‘pecuniary claims arising out of an 
agreement whereby a credit institution, as defined in Article 4(1) of Directive 2006/48/EC
7, 
including the institutions listed in Article 2 of that Directive, grants credit in the  form of a loan ’.  
3.2 The ECB has no objection to this  extension of the definition of credit claims , currently restricted in  
the Regulations to those claims whe re the creditor of a claim is a bank or credit institution . The 
ECB understands that the propos ed extension of the definition of  credit claims is intended to 
include  within the ambit of the Regulations  further categories of credit claims which may be 
provided as collateral . The ECB notes  that credit claims due to or ow ed by individual s are not 
inclu ded in the proposed amendment . In th is context, the ECB notes that the definition of ‘non-
natural person’ in the draft law as ‘any legal person, unincorporated firm or body of persons or 
partnership not being an individual’ was included as a consequential amendment of the proposed amendment to the definition of ‘credit claims ’.  
 
4. Definition of i nstrument  
The ECB understands  that the current definition of ‘instrument’  in the Regulations could generate doubts 
about whether A rticle 2 of the Investment Servi ces Act
8  includes financial instruments for which the 
Regulations are intended to cater . In this regard , it notes the revision of the definition of ‘instrument’ i n 
                                                 
6  Also known as the SICAV Regulations . Legal Notice 241 of 2006.  
7  OJ L 177, 30.6.2006, p.  1. 
8  Chapter 370 of the Laws of Malta . 
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3 Section 2(1) of the  draft law and w elcomes the closer alignment achieved with the wording i n Directive 
2002/47/EC . 
 
5. Recognised jurisdiction  
The ECB notes that the amended definition of ‘recognised jurisdiction ’ in Section 2(1) of the draft law  is 
a definition already used in Maltese law and welcomes the further clarification of this concept t hrough its 
proposed inclusion.  
 
6. Control  
6.1 The new provis ion in Section 2(2) of the draft law provides  that a collateral taker shall also be 
deemed to have control over financial collateral whe n ‘this is held by a third party, non- natural 
person, who a cts on the instructions of the collateral taker or of a person acting on his behalf, 
whether throughout the duration of the financial collateral arrangement or upon the occurrence of  
an event of default under the financial collateral arrangement ’. The ECB understands that this 
provis ion is being introduced  to provide clarity in cases where financial collateral is held by a 
custodian on behalf of the collateral taker . 
6.2 The ECB acknowledges that the concept of control set forth in Directive 2002/47/EC seek s to 
maintain a balance between market efficiency and transactional security , but notes that any 
clarification  of the term ‘control’ must be  aligned with Directive 2002/47/EC . The ECB 
understands that the new provis ion in Section 2(2) of the draft law is added for reasons of legal 
certainty , to further clarify  the validity and enforceability of financial collateral arrangements 
concluded in the circumstances referred to.  
 7. Collateral taker and collateral provider  
As regards the proposed amendments to S ection 4(1) of the Regulations on the list of collateral taker s and 
collateral provider s, specifically paragraphs (a), (k) , (m) and (n) , the ECB has no objection to the 
inclusion of ‘a corporation or other legal person established by statute ’ in paragraph (a ), the inclusion of 
‘securiti sation vehicles ’ in paragraph (k) , and that of ‘ non-natural persons ’ in paragraphs (m) and (n) .   
 8. Enforcement of financial collateral arrangements  
The ECB notes the inclusion of the new paragraph (c) in S ection 6 of the dra ft law, which refers to the 
enforcement of financial collateral arrangements and provides that ‘in relation to instruments consisting 
of securities of a SICAV, the financial collateral may also be realised in the manner and in accordance 
with the value as contemplated in R egulation 14(6)(iii) of the Companies Act (Investment Companies 
with Variable Share Capital) Regulations’.  The ECB notes that the Companies Act (Investment 
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4 Companies with Variable Share Capital) Regulations already provide for the scenario  where the collateral 
taker may realise any financial collateral provided in relation to instruments consisting of the securities of 
a SICAV. In this context, t he process of realisation of financial collateral is clarified by including  a 
reference to the r elevant provision in the se Regulations.  
 
This opinion will be published on the ECB’s website.  
 
 
Done at Frankfurt am Main, 5 April  2013. 
 
[signed]  
 
The President of the ECB  
Mario DRAGHI