Japanese Bankers Association released the “Study Group Report concerning Use of Securities as Collateral in Syndicated Loans, etc” on January 24.
Some issues were raised in the course of deliberations in Japanese Bankers Association on the issue of stock collateral after stock certificates are dematerialized. In the case of stock-secured loans involving multiple lenders as in the case of syndicated loans, the following issues exist with regard to establishing the right of pledge on the stocks being dematerialized. These issues are: (1) Whose account the stocks shall be transferred to, and (2) Whether claims of concerned parties in paper stocks can be preserved intact after dematerialization. There is also a need to deliberate the use of securities as collateral after dematerialization, and the deliberation of the use of stock as collateral, presently seen in syndicated loans, is particularly necessary. The “Study Group concerning Use of Securities as Collateral in Syndicated Loans, etc.” was started to deliberate these issues.
The study group report states as follows: The majority opinion was that it would be possible to establish collateral with the same priority and independence of each collateral holder as is done presently by opening an account with concerned multiple collateral holders’ names and transferring the registered stocks serving as collateral from the pledgor to the account, provided that all concerned parties agree to establish collateral. As to the accompaniment of collateral to assignments of claims, the majority opinion was that legal effectiveness of the collateral could be maintained by opening an account with the transferees’ names and transferring the registered stocks serving as collateral to the account from the previous account with the transferors’ names.