2008/874/EC: Decision of the European Central Bank of 14 November 2008 on the implementation of Regulation ECB/2008/11 of 23 October 2008 on temporary changes to the rules relating to eligibility of collateral (ECB/2008/15)
Date: 2008-11-14
Institutions: European Central Bank
Subjects: European Central Bank, United Kingdom, documentation, euro, financial institution, loan

L 309/8

EN

Official Journal of the European Union

20.11.2008

(Acts adopted under the EC Treaty/Euratom Treaty whose publication is not obligatory)

II

DECISIONS

EUROPEAN CENTRAL BANK

DECISION OF THE EUROPEAN CENTRAL BANK

of 14 November 2008

on the implementation of Regulation ECB/2008/11 of 23 October 2008 on temporary changes to
the rules relating to eligibility of collateral

(ECB/2008/15)

(2008/874/EC)

THE EXECUTIVE BOARD OF THE EUROPEAN CENTRAL BANK,

Having regard to the Treaty
Community
in particular
and
Article 105(2) and to Article 110,

establishing the European
indent of
first
to the

Having regard to the Statute of the European System of Central
Banks and of the European Central Bank and in particular to
the second indent of Article 34.1, in conjunction with the first
indent of Article 3.1 and Article 18.2,

Having regard to Article 8 of Regulation ECB/2008/11 of
23 October 2008 on temporary changes to the rules relating
to eligibility of collateral,

inherent

complexities

Wales, the total number of governing laws applying to
the mobilisation of such loans may not exceed three. The
legal
in the mobilisation of
syndicated loans, when up to three different governing
laws can apply, require the conduct of legal and risk
assessments by the national
the
Member States that have adopted the euro (hereinafter
‘the NCBs’), when providing liquidity against
such
collateral.

central banks of

(3)

The legal complexity involved in the mobilisation of the
above loans requires the adoption of
implementation
criteria relating to the acceptance, as eligible collateral,
of syndicated loans governed by the laws of England and
Wales,

Whereas:

HAS DECIDED AS FOLLOWS:

(1)

credit

claims arising under

On 15 October 2008, the Governing Council of the
European Central Bank (ECB) decided to temporarily
admit
syndicated loans
governed by the laws of England and Wales as eligible
the purposes of Eurosystem monetary
collateral
policy operations. On 23 October 2008, the Governing
Council gave effect to its decision by adopting Regulation
ECB/2008/11 (1).

for

Article 1

Definitions

For the purposes of this Decision:

(2)

Under Article 3(2) of Regulation ECB/2008/11,
for
syndicated loans governed by the laws of England and

— ‘General Documentation’ means Annex I

to Guideline
ECB/2000/7 of 31 August 2000 on monetary policy
instruments and procedures of the Eurosystem (2),

(1) OJ L 282, 25.10.2008, p. 17.

(2) OJ L 310, 11.12.2000, p. 1.

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— ‘syndicated loans’ means credit claims represented by shares
of syndicate member institutions in syndicated loans, as
described in Chapter 6.2.2 of the General Documentation
and governed by the laws of England and Wales.

Paragraph 1 is without prejudice to the right of

2.
relevant NCB to notify the debtor.

the

Article 2

Mobilisation techniques for syndicated loans

1.
An NCB shall mobilise syndicated loans directly from its
relevant counterparty in accordance with its respective domestic
procedures for credit claims. The mobilisation agreement shall
be governed by the law of a Member State belonging to the
euro area.

Chapter 6.6 of the General Documentation shall not apply

2.
to the mobilisation of syndicated loans.

Article 3

Transferability of loans

Only fully transferable syndicated loans shall be eligible. For the
purposes of the fourth indent of Appendix 7 of Annex I to the
General Documentation,
shall not be
considered to be fully transferable and capable of being
for Eurosystem
mobilised without
credit operations unless the loan agreement unconditionally
permits:

restriction as collateral

syndicated

loans

(i) the lender to charge, assign or otherwise create a security
interest in or over its rights to secure obligations of that
lender to an NCB; and

(ii) the relevant NCB to enforce its security interest over such
loan by way of collecting payments under the loan directly
or indirectly from the underlying debtor and by way of
assigning or transferring the loan to a bank or financial
institution or to a trust
fund or other entity which is
regularly engaged in or established for the purpose of
investing in loans, securities or
making, purchasing or
other financial assets.

Article 5

Registration certificate

Counterparties shall provide the relevant NCB with a copy of
the confirmation received from the Registrar of Companies of
England and Wales that mobilisation of the syndicated loan has
been registered at Companies House.

Article 6

Submission by the counterparty of a diligence letter from
external legal counsel

Before mobilisation of syndicated loans, counterparties shall
deliver to the relevant NCB a diligence letter from external
legal counsel addressing, in a manner and form satisfactory to
the Eurosystem, certain diligence issues, as
these may be
elaborated on from time to time by the ECB and published
on its website.

Article 7

Special purpose vehicles as debtors

1.
A special purpose vehicle (SPV) shall be an eligible debtor
under a syndicated loan only if (i) the SPV is the beneficiary of a
guarantee that is issued by a non-financial corporation eligible
as a guarantor within the meaning of Chapter 6.2.2 of the
General Documentation;
(ii) the guarantee complies with the
requirements set out in Chapter 6.3.3 of the General Documen­
tation; and (iii) the relevant NCB is legally entitled to enforce the
guarantee following the mobilisation of the syndicated loan.

Credit claims arising under syndicated loans with SPVs as
2.
debtors
for Eurosystem credit
collateral
operations only if the SPV and the guarantor are established
in the euro area.

shall be

eligible

The

requirement

3.
as
to provide
provided for in Chapter 6.3.3 of the General Documentation,
shall also apply where the debtor is an SPV benefiting from a
guarantee in accordance with paragraph 1.

confirmation,

legal

Article 4

Notification to the debtor

The counterparty shall be required to notify the debtor
1.
under a syndicated loan agreement of the mobilisation of such
syndicated loan as collateral before or immediately following
mobilisation of such loan. Such notification shall be given in
accordance with the applicable procedures as specified in the
syndicated loan agreement.

Article 8

Currency of denomination

For the purposes of Chapter 6.2.2 of the General Documen­
tation, syndicated loans shall be considered to be denominated
in euro only insofar as the relevant loan agreement does not
allow the debtor or the debtor’s agent, on its behalf, to vary the
currency in which the syndicated loan is denominated or
payable at any time before the maturity of the relevant Euro­
system credit operation.

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Article 9

No set-off or counterclaim

over its rights under the agreement to secure obligations of
that lender to a Eurosystem central bank.

Syndicated loans shall only constitute eligible collateral
for
Eurosystem credit operations if the relevant syndicated loan
agreement includes an express provision pursuant to which all
payments to be made by the debtor are made free and clear of
any deduction for set-off or counterclaim.

Article 13

Taxation and Indemnity

Article 10

Restrictions on realisation of collateral

loans

Syndicated

1.
provisions
containing
requiring a majority of lenders to adopt syndicate decisions
vis-à-vis the debtor shall be eligible collateral for Eurosystem
credit operations.

contractual

loan

containing

Syndicated

2.
contractual
agreements
provisions authorising certain terms of the relevant syndicated
loan agreement to be amended or waived with the consent of a
majority of lenders shall be eligible collateral for Eurosystem
credit operations; provided, however, that the loan agreement
for such loans does not provide that majority decisions may be
taken with respect to: (i) an extension to the date of payment of
any amount due under the agreement; or (ii) a reduction in
margin or in the amount of any payment of principal or
interest; or (iii) a change to the principle that each lender’s
obligations under the agreement are several.

involving a

Syndicated loans

for
the
3.
eligible
collection and distribution of payments
collateral
for Eurosystem credit operations only where the
facility agent is a credit institution with a minimum long-term
rating of ‘A-’ by Fitch or Standard & Poor’s, ‘A3’ by Moody’s or
of ‘AL’ by DBRS.

facility agent
shall be

Article 11

Replacement of lender clauses

A syndicated loan containing contractual provisions permitting
the debtor to replace the lender in exchange for an outstanding
for Eurosystem credit
loan shall only be eligible collateral
the counterparty
operations where, prior
provides
security
the
interest in or over the counterparty’s right to receive cash in
respect of such exchange.

to mobilisation,
relevant NCB with an enforceable

A syndicated loan shall only be eligible collateral for Euro­
the
the

1.
system credit operations
conditions set out in this Article.

counterparty

fulfils

if

The counterparty shall provide confirmation from UK tax
2.
counsel to the effect that either:
(a) the debtor will not be
required to retain UK withholding tax as a result of any
transfer, under either English or any other law, of the beneficial
ownership of the loan asset to the NCB; or (b) the debtor will
be required to retain UK withholding tax as a result of such
transfer of beneficial ownership to the NCB, but that the NCB
should be eligible to benefit from the tax treaty between the UK
and the jurisdiction of the NCB, such that once a direction has
been issued by Her Majesty’s Revenue & Customs (HMRC)
under the relevant treaty, the debtor will be entitled to make
interest payments to the NCB without withholding UK tax and
the NCB will be entitled to recover tax previously withheld; or
(c) the debtor will be required to retain UK withholding tax as a
result of such transfer of beneficial ownership to the NCB and
the NCB will not be eligible to benefit from the tax treaty
between the UK and the NCB’s jurisdiction or any other
exemption.

3. Where UK tax counsel confirms that the transfer of bene­
ficial ownership of the loan asset to the NCB falls under either
category (b) or (c) in paragraph 2 above, the counterparty will
be required to agree to indemnify the NCB for any UK with­
holding tax that is withheld by the debtor (and not grossed up
pursuant to the syndicated loan agreement), and for all adverse
cash-flow consequences of any UK withholding tax that is first
retained from, and then refunded to, the NCB.

The counterparty shall assume any and all responsibility
4.
for notifying the debtor of any transfer of
the beneficial
ownership of the loan asset to the NCB that results in the
debtor being required to withhold UK tax (or to withhold UK
tax at a different rate).

Article 12

Disclosure of confidential information

A syndicated loan shall only constitute eligible collateral for
Eurosystem credit operations if the syndicated loan agreement
permits the lender to disclose confidential
information to a
Eurosystem central bank in connection with any charge,
assignment or security interest created by the lender in or

The counterparty shall bear the full cost of any UK stamp
5.
duty (as well as any penalty and interest thereon) that is payable
as a result of any transfer, under either English or any other law,
of the beneficial ownership of the loan asset, and that the NCB
reasonably considers has to be paid in order for the NCB to be
able to adduce the loan asset as evidence in an English court or
use the loan asset for some other purpose in the UK. The
counterparty shall also bear the full cost of any UK stamp
duty reserve tax payable as a result of any such transfer,
if
applicable.

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The counterparty shall provide confirmation from appro­
6.
priate tax counsel
in such jurisdictions that the counterparty
considers applicable, to the effect that the debtor will not be
required to retain non-UK withholding tax as a result of any
transfer, under either English or any other law, of the beneficial
ownership of the loan asset to the NCB, and that any such
transfer will not
trigger liability to any non-UK stamp or
transfer duty.

Article 14

Final provisions

This Decision shall enter into force on 17 November

1.
2008.

2.

This Decision shall apply until 30 November 2008.

7.
The counterparty shall fully indemnify the relevant NCB in
respect of any fees due to the facility or paying agent, or any
other fees or costs related to the administration of the loan.

The President of the ECB

Jean-Claude TRICHET

Done at Frankfurt am Main, 14 November 2008.