1. PRESENTATION OF MONTENEGRO
Negotiating Team for the Accession of Montenegro to the European Union Working Group for Chapter 9 – Financial services
Bilateral screening: Chapter 9
PRESENTATION OF MONTENEGRO
Brussels, 11 June 2013

2. Financial Collateral Arrangements Chapter 9: FINANCIAL SERVICES
Nikola Kaluđerović
Chief of the Division for Licensing, Approvals and Measures
The Central Bank of Montenegro
M O N T E N E G R O
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 9: FINANCIAL SERVICES

3. Chapter 9: FINANCIAL SERVICES
Content
Relevant Acquis
National legislation
Institutional Framework
Level of transposition (key rules)
Enforcement
Future activities
M O N T E N E G R O
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 9: FINANCIAL SERVICES

4. Chapter 9: FINANCIAL SERVICES
Relevant Acquis
Council Directive of 6 June 2002 on Financial Collateral Arrangements 2002/47/EC
M O N T E N E G R O
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 9: FINANCIAL SERVICES

5. Chapter 9: FINANCIAL SERVICES
Chapter 10: Information society and media
National Legislation
Law on Financial Collateral Arrangement/ FCA(Official Gazette of Montenegro, NO. 44/12)
M O N T E N E G R O
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 9: FINANCIAL SERVICES

6. Institutional Framework
Chapter 10: Information society and media
Institutional Framework
FCA does not define authority in charge to oversee the implementation and enforcement of this law.
FCA, inter alia, are applying among Montenegrin institution as follows:
public authorities, including competent public authority in charge of the public debt management, the Central Bank of Montenegro, banks, micro-credit financial institutions, legal entities involved in credit-guarantee activities, the Central Depository Agency, the Health Insurance Fund, the Pension and Disability Fund, the Investment and Development Fund, and insurance companies, investment funds, investment fund management companies, authorized participants in the securities market.
M O N T E N E G R O
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 9: FINANCIAL SERVICES

7. Institute “ Financial Collateral” in the national legislation
Chapter 10: Information society and media
Institute “ Financial Collateral” in the national legislation
Article 2 of The FCA
Financial collateral, means a transfer of title or provision of security by way of a financial instrument, cash or credit claims specified under the financial collateral arrangement, for the purpose of securing the performance of relevant financial obligation.
Financial collateral also include the income from financial instruments or cash provided as financial collateral unless otherwise specified under the collateral arrangement.
M O N T E N E G R O
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 9: FINANCIAL SERVICES

8. Level of Transposition
Chapter 10: Information society and media
Level of Transposition
Directive on Financial Collateral Arrangements 2002/47/EC  FCA Law
M O N T E N E G R O
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 9: FINANCIAL SERVICES

9. Level of Transposition
Chapter 9: Financial Services
Level of Transposition
Article 1 of The Directive~
Article 3 FCA
Collateral Taker and Collateral Provider must each belong to one of the following categories:
A public authority in an EU Member State;
A Central Bank, ECB,BIS, a Multilateral Development Bank, IMF, EIB;
A Financial Institution subject to prudential supervision including: Credit Institutions, Investment Firms, Financial Institutions, Insurance Companies, UCITS, Management Companies;
A Central Counterparty Settlement Agent or Clearing House.
M O N T E N E G R O
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 9: FINANCIAL SERVICES

10. Level of Transposition - Cont. -
Chapter 9: Financial Services
Level of Transposition - Cont. -
Article 3 LFC ~ Option 1 . Art 1(3) The Directive
Montenegro used the option to extend the scope of the Directive regarding Collateral Taker and Collateral Provider;
Collateral Taker and Collateral Provider with the registered seat in Montenegro;
public authorities, including competent public authority in charge of the public debt management, the Central Bank of Montenegro, banks, micro-credit financial institutions, legal entities involved in credit-guarantee activities, the Central Depository Agency, the Health Insurance Fund, the Pension and Disability Fund, the Investment and Development Fund, and insurance companies, investment funds, investment fund management companies, authorized participants in the securities market
M O N T E N E G R O
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 9: FINANCIAL SERVICES

11. Level of Transposition - Cont. -
Chapter 9: Financial Services
Level of Transposition - Cont. -
Principles
Directive
FCA
The Lex Rei Sitae Rule
Where book entry securities, including rights over such securities, are provided as financial collateral and the rights over these securities have been registered in the relevant account, governing shall be the law of the country in which the relevant account is maintained. (Art. 19)
Collateral must be in possession or under the control of the Collateral taker
Financial collateral shall be deemed provided to the collateral taker by being delivered, transferred, held, registered or otherwise designated so as to be in the possession or under the control of the collateral taker or a person acting on the collateral taker’s behalf (Art 7/2)
M O N T E N E G R O
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 9: FINANCIAL SERVICES

12. Level of Transposition - Cont. -
Chapter 9: Financial Services
Level of Transposition - Cont. -
Principles
Directive
FCA
FCA has to be proven and clear evidence in writing or a durable medium, must exist, ensuring thereby the traceability of the collateral.
The validity of a financial collateral arrangement can be evidenced in writing verifying the concluded arrangement and/or sale and acquisition of financial collateral (art. 8/1).
The evidence in writing under paragraph 1 above shall be any record or durable medium or any other means relevant for evidencing the existence of the and/or the financial collateral arrangement (art. 8/2)
M O N T E N E G R O
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 9: FINANCIAL SERVICES

13. Level of Transposition - Cont. -
Chapter 9: Financial Services
Level of Transposition - Cont. -
Principles
Directive
FCA
Simplification of the financial collateral – limitation of administrative burdens
In case under art. 14/1, the collateral taker shall have the right, without a court and/or any relevant authority’s approval, realize the financial collateral through sale, appropriation or setting .
Unless otherwise agreed (it means that additional revision made by the court may be agreed), the realization of the financial collateral shall be without any requirement to the effect that, inter alia: The terms of the realization of the financial collateral have been approved by the court, other institution or other person (art.16/3/2).
M O N T E N E G R O
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 9: FINANCIAL SERVICES

14. Level of Transposition - Cont. -
Chapter 9: Financial Services
Level of Transposition - Cont. -
Art.2/1 FCA
The Financial Collateral to be provided in:
1) Cash;
2) Financial instruments
M O N T E N E G R O
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 9: FINANCIAL SERVICES

15. Level of Transposition Cont.
Chapter 9: Financial Services
Level of Transposition Cont.
Definitions (art.4 FCA)
Cash  cash credited to an account or a deposit in any currency, other than cash on hand;
Financial instruments reffers to only to shares and bonds and other forms of debt instruments that are negotiable on the capital market
M O N T E N E G R O
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 9: FINANCIAL SERVICES

16. Level of Transposition Cont.
Chapter 9: Financial Services
Level of Transposition Cont.
Art. 16/2 FCA
To allow Appropriation (The Collateral could be given to the Collateral Taker).
Appropriation is possible only if :
this has been agreed by the parties in the security financial Collateral arrangement;
the parties have agreed on the valuation of the financial instruments.
M O N T E N E G R O
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 9: FINANCIAL SERVICES

17. Level of Transposition Cont.
Chapter 9: Financial Services
Level of Transposition Cont.
Art. 10 FCA ~ Right of Use
The Collateral Taker is entitled to exercise a right of use in relation to financial collateral.
This does not, however, give the Collateral Taker the right to reduce the value of the Collateral.
M O N T E N E G R O
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 9: FINANCIAL SERVICES

18. Level of Transposition Cont.
Chapter 9: Financial Services
Level of Transposition Cont.
Recognition of Close-Out Netting Provisions
(Art. 10 FCA)
Close-out netting provisions is an arrangement used to reduce credit risks on financial markets
The close-out netting provision is, inter alia, a provision in a financial collateral arrangement or, in the absence of such a provision, any statutory provision by which, on the occurrence of the circumstances under Article 14 paragraph 1 hereof the obligations of the parties become immediately due and expressed as an obligation to pay an amount representing the estimated current value of the financial collateral.
M O N T E N E G R O
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 9: FINANCIAL SERVICES

19. Level of Transposition Cont.
Chapter 9: Financial Services
Level of Transposition Cont.
Certain Insolvency Provisions Dissaplied (Art 13 FCA)
By this article of the FCA, Montenegro ensures that a financial collateral arrangement may not be declared invalid on the sole basis that the arrangement has come into existence on the day of commencement of winding-up proceedings or reorganisation measures, but prior to the order or decree making the commencement
M O N T E N E G R O
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 9: FINANCIAL SERVICES

20. Enforcement and Future Activities
Chapter 9: Financial Services
Enforcement and Future Activities
FCA does not define authority in charge to oversee the implementation and enforcement of this law.
Art. 20 FCA  The rights and obligations arising out of the giving and receiving of collateral, which are not regulated by FCA, are regulated by the provisions of laws that regulate the right of pledge on movables.
The FCA is a new law, passed by MNE Parliament on July 26th 2012
In this respect, the practice of applaying FCA has yet to be establish
M O N T E N E G R O
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 9: FINANCIAL SERVICES

21. Thank you for your attention.
QUESTIONS