Pledge 

Pledge is a collateral agreement where both possession and ownership of the collateral is always with the lender.

Collateral agreements for the category Assignment type share the same business scope with the collateral agreements for the category Pledge.

Use

Assets (collateral objects) that can be pledged include collateral objects such as jewellery, rights and securities accounts. The pledged collaterals must be in a transferable form, because the collateral object has to be handed over to the lender. Collateral Management supports the following business requirements for pledges and assignments:

 

Master data specific to pledges

 

Classification

In this tab page, you can specify the following:

○     If a waiver for the general business condition (GBC) lien is available

○     If the collateral agreement is disclosed (to the interested third-parties)

○     The credit insurance cover available for the pledge or assignment. This information can be used in the event of a default of payment by the borrower.

 

Stock data

In the case of inventory stock, you can enter the minimum amount of stock that must be maintained. In the scenario where there is a variation (reduction) in the minimum stock amount, you can specify if an additional receivable must be assigned to accommodate the variation.

 

Business scenarios for pledges and assignments:

 

●     Deal specific agreement

A pledge must always be a deal-specific collateral agreement as they are dependent on the existence of a receivable. Therefore, only manual links can be generated between pledges and receivables.

 

●     Disclosure of a pledge

You may need to specify if the assignment or the pledge is disclosed to interested third-parties.

 

●     GBC Lien waiver

Availability of a waiver for GBC lien in the following circumstances:

 

○     If the credit balance of an account has been pledged, a waiver must be obtained from the third-party debtor who has a claim on the account that is pledged.

 

○     If securities have been pledged, the depository in which the pledged securities are present, should have relinquished the lien vested in them as per their GBC. This is because, according to the GBC, the third party debtor or the depository can enforce better rights on the collateral at any time if their own claims against the collateral giver exist

 

If a waiver for GBC is not available, then the value for the pledge can be reduced. To reduce the value of the pledge, you can choose one of the following options:

 

■      Create a non collateral right GBC lien as a prior charge.

■      Define a special markdown on the assessment amount of the pledge.

■      Reduce the value of the collateral object via safety discount at the corresponding collateral object.