RWG files response to EBA Consultation Paper

27th May 2019

The RWG has filed a response to the European Banking Authority Consultation Paper which sets out draft guidelines on Credit Risk Mitigation for financial institutions. Specifically the response focused on guidelines 19-21 and the suggested expansion of the requirement to obtain legal opinions to provide more legal certainty of and legal effectiveness and enforceability in relation to railway rolling stock as movable physical collateral. It argued that the expanded requirement was too burdensome and should be limited to covering only key jurisdictions. It further reasoned that the guidelines should take into account international treaties such as the Luxembourg Rail Protocol and that when the debtor was in a contracting state, there should only be a requirement for legal opinions in the jurisdiction in which the debtor has its principal place of business and the jurisdiction whose laws govern the relevant agreement providing the collateral.

The submission concluded that “as currently stated, the draft guidelines will significantly constrain, or make more expensive, the provision of private credit at a time when more private sector investment in the rail sector is urgently needed. The requirement for legal opinions should be limited to a level which is reasonable in the context of how the rail industry and financing works in practice.”

The RWG’s detailed response may be found here