Originally published in IFLR/International Briefings Slovenia, July 2011
On the 30th of June the latest amendment to the Financial Collateral Act (FCA) will come into force, with its main objective to assist the economy in tackling the credit crunch, thus creating new jobs and incentives for economic growth. The underlying reasons for the amendments to the FCA may be attributed to the European Commission's conclusion that the range of collateral assets need to be extended to bank loans, especially since the importance of bank loans as collateral assets in the EU is growing. At the same time, it was necessary to facilitate and remove national barriers to the creation of such collaterals, and to unify the rules for transactions between central banks in order to promote cross-border use of the said collaterals.
The amendments to the FCA therefore provide for an extended range of eligible collateral. In addition to cash and financial instruments (shares and other securities, bonds), a bank loan is now also a possible form of collateral. A guarantee may be performed via either a) a transfer of bank loan as collateral, or b) by the creation of a lien on the loan.
The Ministry of Justice of the Republic of Slovenia contends that this will give way to increased market competition in this area and consequently improve the availability of loans both nationally and at the EU level. As a...