Living in an uncertain economy with financial instability, makes it harder to bring about secure financial transactions. Indeed, the availability of information regarding the borrower to the lender has been seen as asymmetrical and led to some problems associated with credit risk. Hence the need for security for the lender. In this case, floating charge in particular is an English innovation in security that very well serves both borrower’s and lender’s objectives.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Information asymmetry and credit risk
- Security and The Floating Charge
- Crystallization / De-crystallization
- Evaluating Floating Charge As Security
- Conclusion
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This paper critically discusses the concept of the floating charge in English law, examining its role in securing financial transactions in a context marked by information asymmetry and credit risk.
- The impact of information asymmetry on credit risk and the role of financial intermediaries in mitigating these issues.
- The concept of security in debtor-creditor relations and the various classifications of securities, including proprietary and possessory securities.
- The nature of floating charges as open-ended proprietary securities and their characteristics, such as the ability of the debtor to dispose of the collateral.
- The concept of crystallization and how it affects the floating charge, transitioning it from a flexible to a fixed security interest.
- The practical implications of floating charges in securing advances made to companies and their use by financial institutions.
Zusammenfassung der Kapitel (Chapter Summaries)
- Introduction: Introduces the context of financial transactions in an uncertain economy and the need for security to mitigate information asymmetry and credit risk. The focus is on the floating charge as an English innovation in security that serves both borrowers' and lenders' objectives.
- Information asymmetry and credit risk: Explores the concepts of information asymmetry and credit risk, drawing on the 1970s' 'economics of imperfect information' and the role of financial intermediaries in reducing information and transaction costs. It discusses 'adverse selection' and 'moral hazard' issues related to information asymmetry in credit markets.
- Security and The Floating Charge: Defines the concept of security in debtor-creditor relations and classifies different types of securities, highlighting the characteristics of floating charges as open-ended proprietary securities. The paper discusses the role of floating charges in protecting creditors against insolvency and their use by financial institutions.
- Crystallization / De-crystallization: (No summary provided to avoid spoilers.)
- Evaluating Floating Charge As Security: (No summary provided to avoid spoilers.)
Schlüsselwörter (Keywords)
The paper focuses on the core concepts of information asymmetry, credit risk, floating charges, security interests, crystallization, and the role of financial institutions in mitigating financial risks.
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- Jennie Robinson (Autor), 2015, The importance of security in lending, Múnich, GRIN Verlag, https://www.grin.com/document/432709
