1.3 secured transactions (w bank)

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  • Impact of moveable collateralThere is an expanding evidence base on the importance of collateral in credit markets, including recent work on impact of collateral reforms in developing countries. In many instances the research analyzes the overall importance of secured lending and does not distinguish between fixed and moveable collateral. A few studies, however, do look at the impact of moveable collateral on lending markets. Impact findings both from studies focused solely on moveable assets, and from those analyzing moveable and fixed collateral:Clear Priority – “Debt Enforcement Around the World”, Djankov, Hart, McLiesh and Schleifer. Journal of Political Economy, 2008.Industrial Countries - Chaves, Rodrigo, Nuria de la Pena and Heywood Fleisig, 2004. “Secured Transactions Reform: Early Results from Romania.” CEAL Issues Brief, Center for Economic Analysis of Law, September 2004.
  • 1.3 secured transactions (w bank)

    1. 1. Increasing Access to Credit Through Secured Transactions Systems and Collateral Registries. International Practices<br />Alejandro Alvarez de la Campa, WBG<br />Mauritius, April 20, 2010<br />
    2. 2. 2<br />WHAT DO WE MEAN BY SECURED TRANSACTIONS SYSTEMS?<br />SECURED TRANSACTIONS SYSTEMS: LEGAL AND INSTITUTIONAL FRAMEWORK THAT ALLOW COMPANIES TO USE MOVABLE PROPERTY AS COLLATERAL TO ACCESS CREDIT. <br />MOVABLE PROPERTY: ALL TYPES OF MOVABLE ASSETS, TANGIBLE AND INTANGIBLE, PRESENT AND FUTURE, INCLUDING:<br /><ul><li>Vehicles, industrial machinery and equipment
    3. 3. Inventory
    4. 4. Accounts receivable
    5. 5. Agricultural products (fertilizers, crops, livestock, fishfarm)
    6. 6. Consumer goods (computers, furniture)
    7. 7. Commodities
    8. 8. Intellectual Property Rights
    9. 9. Negotiable instruments (shares, stocks)
    10. 10. Letters of Credit
    11. 11. Bank accounts, insurance policies, etc.</li></li></ul><li>ECONOMIC IMPORTANCE OF SECURED TRANSACTIONS<br />Secured Transactions Contributes to Sound Financial Systems<br /><ul><li>Diversification of assets held by financial institutions to spread risksmore efficiently
    12. 12. Reducing concentration and increasing competition in the financial sector, by enabling both banks and non-bank financial institutions to offer secured loans
    13. 13. Improving the ability of regulators to analyze portfolio risks</li></ul>Modern Secured Transactions Systems Increase Access to Credit <br />and Decrease the Cost of Credit <br /><ul><li>  Increasing the level of credit: In countries with a predictable priority system for creditors in cases of loan default, credit to the private sector as a percentage of GDP averages 60% compared with only 30 to 32% on average for countries without these creditor protections
    14. 14. Decreasing the cost of credit: In industrial countries, borrowers with collateral get 9 times the level of credit given their cash flow compared to borrowers without collateral. They also benefit from longer repayment periods (11 times longer) and significantly lower interest rates (50% lower)</li></li></ul><li>4<br />Better Secured Transactions Systems = More Credit and Fewer defaults<br />Source: Doing Business<br />
    15. 15. 5<br />WHY IS COLLATERAL AND COLLATERAL REGISTRIES IMPORTANT?<br />Assets Held by Firms<br />Assets Banks Accept as Collateral<br />Source: WB Enterprise Surveys<br />
    16. 16. 6<br />COLLATERAL REGISTRIES ARE PART OF DIFFERENT INSTITUTIONS DEPENDING ON THE JURISDICTION<br />
    17. 17. PERFORMANCE OF CRF COUNTRIES IN DOING BUSINESS LEGAL RIGHTS INDEX<br />7<br />
    18. 18. METHODOLOGY FOR EVALUATING THE COLLATERAL REGISTRY IS RESTRICTED TO:<br />8<br />DOING BUSINESS LEGAL RIGHTS HAS HOWEVER LIMITED INFORMATION ON THE QUALITY OF COLLATERAL REGISTRIES<br /><ul><li>Having a collateral registry in operation (could be paper based or electronic)
    19. 19. Unified geographically (centralized) and by types of assets
    20. 20. Indexed by the grantor of a security right (searchable by debtor’s name)</li></li></ul><li>REAL BEST PRACTICE CASES OF MODERN COLLATERAL REGISTRIES<br />9<br />COUNTRIES WITH MODERN COLLATERAL REGISTRY SYSTEMS: USA, CANADA, NEW ZEALAND, CHINA (CRC in PBOC), CAMBODIA, BOSNIA HERZEGOVINA, ROMANIA, SLOVAKIA, VANUATU, MARSHALL ISLANDS, ETC..<br />OTHER COUNTRIES (MEMBERS OF CRF) ARE REFORMING: RWANDA, JORDAN, AUSTRALIA<br />WHAT IS THE PROBLEM?: MODERN SECURED TRANSACTIONS IS A RELATIVELY NEW CONCEPT (1950s IN US). SO ALL UNREFORMED CIVIL LAW AND COMMON LAW SYSTEMS HAVE OBSOLETE SECURED TRANSACTIONS CONCEPTS<br />
    21. 21. 10<br />PUBLICITY OF SECURITY INTERESTS IN <br />MOVABLE COLLATERAL: COLLATERAL REGISTRIES<br />The means of making a claim against movable property transparent to third parties, and to establish the priority over a specific assets visvis third parties. Registration of “security interests”, “charges” or “pledges”. Main principles:<br />1. Registry for rights on all types of movable property (tangible and intangible) and for all types of natural and juridical persons (companies)<br />2. Electronic web-based registry for real time data<br />3. Centralized data <br />4. Notice based system<br />5. Simplicity - information contained limited to what is essential: creditor, debtor, loan amount, general description of the asset<br />6. No notarization or submission of documents needed<br />7. Data and searches accessible to all at real time<br />8. Reasonable fees (flat fee for each registration)<br />9. Security for data protection<br />
    22. 22. 11<br />IFC SECURED TRANSACTIONS – BUSINESS & DELIVERY MODEL<br />Stakeholder Management (client: government + beneficiaries: FIs and NBFIs) + M&E <br />SOLUTION DESIGN<br />IMPLEMENTATION<br />DIAGNOSTIC<br />What is wrong?<br />How to fix it? <br />Making it happen <br />Advice on revising,harmonizing the legal framework<br />Enacting new laws. Intensive consultations to meet legislative agenda<br />No laws, complex / conflicting laws<br />LAW<br />No registry or paper-based, dysfunctional registry<br />New electronic / web based registry. Study visits, training, live demonstrations of registry, access points<br />Creation of new registry or registry redesign, shift to electronic platform<br />REGISTRY<br />Focus on raising awareness, building partnerships with private and public sector<br />Training of FIs and NBFIs. Workshops, conferences, media outreach, lending survey<br />Little or no movable asset financing<br />CAPACITY<br />
    23. 23. 12<br />CURRENT PROJECT PORTFOLIO<br />
    24. 24. 13<br />CHINA CASE: REFORM PROCESS<br />
    25. 25. 14<br />CHINA: OPENING UP $1 TRILLION IN CREDIT FOR BUSINESSES THROUGH SECURED TRANSACTIONS REFORM<br />
    26. 26. 15<br />SECURED TRANSACTIONS GUIDE<br />IFC EXTERNAL WEBSITE<br />http://smartlessons.ifc.org<br />
    27. 27. 16<br />COLLATERAL REGISTRY DEMO<br />
    28. 28. Welcome Screen<br />
    29. 29. Set Up Client Account<br />
    30. 30. Client Home Page<br />
    31. 31. Client Account General InformationWhen account is opened, Contact information is filled with the initial Client Security Administrator’sinformation, but may be changed. A client security administrator may update information in this screen.<br />
    32. 32. Client Account UsersA client security administrator may add, delete, restore or change rights of users of the account.To delete, restore or change rights of a user, click the User Name to open the User Profile screen.<br />
    33. 33. User ProfileTo delete a user, security administrator unchecks the Active box. To restore a user whose accesshas been disabled by unsuccessful attempts to log-in, security administrator re-checks the Active box.<br />
    34. 34. Client Account Financial TabAn index of past statements will be displayed in the Past Statements frame.To view activity and amount due for a past month, click the month.<br />
    35. 35. Initial Notice Filer InformationIf the filer is the secured party, click “Add Filer as Secured Party” to automatically fill and bypass Secured Party tab.<br />
    36. 36. Add DebtorSelection of Debtor Type causes the correct type of field to be displayed for the debtor identifier, i.e. ID number or name.<br />
    37. 37. Debtor TabClicking the pencil icon in the left column will display Debtor information in the Add Debtor screen for edit.Clicking on the black X will delete the Debtor from the record.<br />
    38. 38. Secured Party Tab<br />
    39. 39. Collateral TabAt least one of the fields must contain information. That is, collateral may be described by anarrative description, a vehicle serial number, an attached PDF, or any combination of them.<br />
    40. 40. Review Notice<br />
    41. 41. Confirm NoticePrint this page as proof of filing. Click the Print icon in the upper left to select a printer.<br />
    42. 42. Change Notice – First Screen<br />
    43. 43. Change Notice – Second ScreenIf change is a Continuation or Termination, Debtors, Secured Parties and Collateral tabs will not be displayed.<br />
    44. 44. Termination ConfirmationOther types of changes will have similar screens with all relevant information displayed for print as confirmation of filing.<br />
    45. 45. Search by File Number<br />
    46. 46. Search by DebtorSelection of Debtor Type will display appropriate type of field for entry of Debtor ID number or name.<br />
    47. 47. Search by Vehicle SN<br />
    48. 48. Search Report (Page 1)<br />
    49. 49. Search Report (Page 2)<br />

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