World Bank Brown Bag Lunch 17 May 2005 EBRD Guiding Principles for the Development of Charges (Collateral) Registry

1. World Bank Brown Bag Lunch17 May 2005EBRD Guiding Principles for the Development of Charges(Collateral) Registry Frederique Dahan

2. EBRD Secured Transactions Project • EBRD promotes transition to market economy whilst being a commercial bank committed to sound banking principles • First hand experience of law deficiencies • Constant involvement in the subject since 1992 – has built experience and expertise • Combines policy and operational work

3. Presentation outline • Genesis of project and assumptions • Survey of registries in Balkans (Al, Bul, FYROM, SiM [K + M], Rom) • Guiding Principles and selected examples • Useful tool? First experience

4. Project Genesis: on-going problem • Concept of charges registration system increasingly accepted • Myth that publicity system naturally flows from the law • Reality is that law effectiveness tested by the system • Too often seen as a technical job by those involved in reform

5. Project Genesis: existing need • No available information about existing systems and their efficacy • Country to ‘reinvent the wheel’ and not to benefit from experience of neighbours (including technology) • Tendency of advisers to provide ‘turn key’ system sometimes not adapted to context • Lack of broadly accepted guidelines: base criteria

6. Project Genesis: opportunity • For EBRD • emphasise on the why and how, as opposed to the what • comparative survey to encourage convergence towards common standards • For recipients • can make informed choices according to context • can leapfrog older systems, especially technically

7. Project Genesis: working assumptions • Analysis grounded on practical use: law and regulations but also registration forms, fees level, users feedback (esp SMEs), IT system, etc • Principles and recommendations formulated in an impartial, constructive fashion • Objective not to rank the existing registries against each other • Electronic registration system versus paper based

8. Survey Results Four main areas • Functions of the system – the basics • Registration process • Searching process • Robustness of the system: institutional, technical and views of the users

9. Survey Table No 1

10. Survey Table No 2

11. Survey No 3

12. Back to Principles 1) Who should apply for registration? • Traditionalists: no entry can be made against chargor without his consent • Market liberals: chargeholder has interest ensuring entry quickly and efficiently • Need to find practical means which satisfy both criteria

13. Findings – very diverse solutions • Albania and Montenegro: only chargeholder • Slovakia and Hungary: only chargor • Bulgaria and Romania: either chargor or chargeholder • FYRMacedonia: jointly chargor and chargeholder • Often one party can represent the other

14. If chargeholder can request entry: chargor consent assumed chargor needs rapid remedy and right to compensation if abuse Evidence of chargor consent may have to be produced to registrar If chargor can request entry: chargeholder to ensure the contents are as agreed by preparing the application form or check once entry done chargeholder to make request on chargor behalf Balancing the interests

15. Guiding Principle… • Key question to make the choice • What is best adapted to the given context (institutional, social, cultural, technical) … • whilst remaining simple, fast, cheap • False issue • One size fits all ‘System for giving publicity should be simple and fast Method for recording should protect again abuse and fraud’

16. Back to Principle: Who should run the registry? • Question tends to focus the minds • Usually wrongly presented and lack of clear selection criteria • Choice can be key….

17. No clear pattern in EBRD region

18. Guiding Principle… • ability and capacity to operate the system within the law → registrar should have clear and detailed guidelines • optimum support to the secured credit market • plus effective system of supervision and control ‘registry should be operated and managed transparently as a public service’

19. EBRD Guiding Principles • Effective publicity is key to secured credit • Allows to find out charges over person’s assets and their ranking order • Achieve by registration against name of chargor • Lack of registration makes charge inopposable to third parties • Registration and searching must be simple

20. Continued • Registration and searching must be fast and inexpensive • Registry accessible and information public to all • System must protect against error, abuse and fraud • Registry operated and supervised transparently and as public service

21. Using the EBRD GP and Survey • Reference point to discuss fundamental issues: e.g. Georgia and registration against charged assets • Data to provide comparative analysis: e.g. Poland • Encourage objective review of existing systems: e.g. Bulgaria

23. Conclusion • EBRD practical experience • Need further testing and feedback • Economic exercise: risk reduction