Typical Personal Security Rights in the EU

Almudena de la Mata Muiioz Typical Personal Security Rights in the EU Comparative Law and Economics in Italy, Spain and other EU Countries in the Light of EU Law, Basel II and the Financial Crisis Mohr Siebeck

Preface Overview Abbreviations VII IX XII XXXIII Introduction 1 Chapter 1: The system of security rights in Italy and Spain 5 A. Delimitation of the concept of security right 5 I. The concept of security right in a broad sense 5 II. The concept of security right in Private Law. The need for a flexible legal framework 5 III. The concept of security and the debtor's general liability 7 B. Classification of security rights 8 I. Dichotomy between personal and real security rights 8 1. In general 8 2. Personal security rights 8 a) Concept of personal security right 8 b) Personal security rights granted by private or by professional sureties 9 c) State guarantees: and their particular role in the context of 2008/2009 financial crisis 10 d) Different kinds of personal security rights (typical and atypical) 11 3. Real security rights 12 4. Personal vs. Real security rights 13 C. The practical functions of security rights: Law, economics and social implications 14

XIV I. Security protects the creditor against debtor's default 15 1. Assessing the need or security 15 2. Assessing the value of security upon enforcement: recovery rate. 17 3. How personal and real security rights affect the principle of par conditio creditorum 19 II. Security enhances the grant of credit 19 III. Security enables the grant of credit at lower costs 20 IV. Security contributes to economic development 22 1. How security impacts economic development 22 2. The EU policy action in view of enhancing credit and its impact on security interest 23 V. The role of security rights in terms of financial stability 23 VI. The role of security rights in the 2008 financial crisis 23 Chapter 2: The contract of guarantee in the Spanish and Italian legal systems (fideiussione/fianza) 25 Introduction 25 A. Concept and legal nature of the guarantee contract 25 I. Notion of guarantee. The Roman law imprinting 25 II. Legal notion of guarantee 27 1. In general 27 a) The guarantee is a contract 28 b) The guarantee is a form of security right 28 c) The guarantee is a personal security right 29 2. The guarantee obligation 29 HI. Structure of the contract of guarantee 30 1. The parties to the contract of guarantee 30 2. The contract of guarantee as a source of obligations. Unilateral or bilateral obligations 33 a) In general 33 b) Natural gratuitousness of the typical guarantee 33 c) Onerous character of professional guarantees 34 d) Concept of remuneration for a guarantee 34 aa) Any kind of compensation 34 bb) Remuneration to the guarantor or to a third party 35

XV cc) Performed by the creditor 35 e) Effects of the gratuitous or onerous character of the guarantee 35 IV. Constitutive characteristics of the guarantee contract (ancillarity and subsidiarity) 36 1. In general 36 2. Ancillary character of the guarantee obligation: the principle of co-extensiveness 36 a) Definition and legal effect of the principle of co-extensiveness 36 b) Principle of co-existensiveness as a typical characteristic of the contract of guarantee 38 c) Limitation of the principle of co-extensiveness 39 aa) Legal exceptions to the principle of co-extensiveness...39 bb) Derogation by the parties of provisions regarding the principle of co-extensiveness: the guarantees "on first demand" 40 3. The secondary nature of the guarantee 41 V. Similarities between the guarantee and other related legal instruments 42 1. Guarantee and assumption of debt 42 2. Guarantee and assumption of performance 43 a) In general 43 b) Assumption of performance (delegazione di pagamento/ asuncion de cumplimiento) 43 c) Expromission (espromissione/expromision) 44 3. Guarantee and adherence to the debt (acollo/adhesion a ladeuda) 44 4. Guarantee and mandate to provide credit (mandato di credito/ mandate de credito) 46 5. Guarantee and guarantee for a bill of exchange (avallo/aval) 46 B. Creation of the guarantee 47 I. The sources of the contract of guarantee 47 1. In general 47 a) Consensual guarantee 48 b) Statutory guarantee 48 c) Judicial guarantee 49 2. Legal regulation on consensual, statutory and judicial guarantees 50

XVI a) Requirements regarding the guarantor 50 b) Alternatives to the legal or judicial duty to provide a guarantor 50 c) Substitution of the insolvent guarantor 51 d) Jurisdiction applicable to the guarantor 51 e) Specific consequences for the judicial guarantor. Exclusion of the benefit of discussion 52 II. Creation of the guarantee obligation 52 1. Conclusion of the contract of guarantee 52 a) Offer and acceptance 52 aa) The guarantor's offer 52 (i) Form of the offer 53 (a) Express but not necessarily written form 53 (P) The meaning of the terms: 'express' and 'tacit' 54 (y) Compulsory written form for commercial guarantees in Spain 55 (ii) Proof of the constitution of the guarantee 55 bb) The creditor's offer 56 cc) Acceptance 57 (i) No need for acceptance of the guarantee by the debtor 57 (ii) Express acceptance of the guarantee by the creditor 57 (a) Is the creditor's express acceptance a constitutive requirement? 57 (P) Legal effects of the creditor's acceptance of the guarantee 58 2. Object of the guarantee 59 a) In general 59 b) Effects of the principle of co-extensiveness on the object of the guarantee 60 aa) The secured obligation must be valid 60 bb) The extent of the secured obligation limits the extent of the guarantee 61 C. Extent of the guarantee obligation 61 I. In general 61 II. The extent of a non-limited guarantee 62 1. Determination of the extent of non-limited guarantees 62 a) The secured obligation 62

XVII b) Extensions of the secured obligation after constitution of the guarantee 62 c) The specific case of extension of time (prorroga) 63 d) Accessories 64 aa) In general 64 bb) Definition of the term "accessories" 65 (i) In general 65 (ii) Accessories of the secured debt 65 e) Costs of legal proceedings 66 2. Guarantee exceeding the secured obligation or in duriorem causam. Reduction of the exceeding extent 66 3. Convenience of establishing a maximum amount as legal constitutive requirement 67 a) In general 67 b) Special case: liability limitation for non-professional guarantors 67 c) Special case: liability limitation for future guarantees 68 III. The extent of a limited guarantee 68 1. Limitation of the guarantee in terms of amount 68 2. Limitation of the guarantee in terms of conditions 68 3. Limitation of the guarantee in terms of extension of time 68 IV. The guarantee for future obligations 69 1. Notion of guarantee for future obligation 69 2. Guarantee for future obligations and principle of co-extensiveness 69 3. The protection of the guarantor for future debts 70 a) The maximum amount 70 b) Guarantor's discharge (art. 1956 Italian CC) 71 V. Guarantee for conditional obligations 72 1. In general 72 2. The nature of a guarantee for conditional obligations 72 VI. The universal guarantee (fideiussione omnibus/ fianza omnibus) 72 1. The concept of universal guarantee 72 2. Practical applications 73 a) In general 73 b) Advantages for the parties 73

XVIII c) Clauses used in banking practice in order to create a universal guarantee 73 3. Validity of the universal guarantee 75 a) In general 75 b) The problem of a determinable object 75 c) The principle of good faith in specifying the guarantee's object 78 d) A universal guarantee included in general terms and conditions and the matter of surprising clauses 78 4. Extent of the universal guarantee 79 a) In general 79 b) Universal guarantees with time limit or without time limit 79 aa) Guarantees with time limit 79 bb) Guarantee without time limit 80 5. Protection of the universal guarantor 80 a) Need for protection 80 b) Limitation of the guarantor's liability 80 c) Is the agreement of a maximum amount a sufficient protection for the universal guarantor? 82 d) Duty to inform the guarantor of the debtor's financial difficulties and to request authorisation in order to grant further credit 82 e) Italian protective regulation. An example for Spain? 83 VII. Guarantee for an invalid obligation 84 1. The guarantee for a void obligation 84 a) In general 84 b) The guarantee explicitly granted for the case of nullity of the secured obligation 85 c) The guarantor's awareness of the nullity of the secured obligation 86 2. Nullity of the secured obligation by reason of simulation 86 3. Nullity caused by the guarantor 86 4. Nullity and avoidabiliry 87 5. Validity of the waiver by the guarantor to set up the defence of nullity of the secured obligation. The case of guarantees on first demand 87 VIII. Limitation of the extent by the agreement of certain conditions 88 D. Relationship between guarantor and creditor 89 I. In general 89

XIX II. Creditor's rights and duties before the debt has become due and payable 89 1. Creditor's right to assign the credit 89 2. Creditor's duties before the debt has become due and payable 90 a) In general 90 b) Duty to inform about the debtor's delay in secondary guarantees 90 c) Duty to inform about the debtor's financial difficulties 91 d) Duty to notify the assignment 92 III. Rights of the guarantor vis-a-vis the creditor 92 1. The benefit of discussion 92 a) General notion 92 b) Benefit of discussion, ex lege or agreed by the parties 93 c) The nature of the benefit of discussion 94 d) The benefit of discussion and the co-guarantee 95 e) The benefit of discussion for sub-guarantors 96 f) Requirements for the application of the benefit of discussion 96 aa) The guarantor must raise the benefit of discussion 96 bb) The guarantor must point out the goods of the debtor subject to discussion 97 (i) Excessive difficulty to enforce. Explicit exclusion from the discussion of certain assets 97 (ii) Need to point out sufficient assets to satisfy the creditor 98 cc) The guarantor must anticipate the costs of the discussion 99 g) Duty of the creditor to diligently discuss the debtor's assets 99 h) Exceptions of the benefit of discussion 100 aa) Benefit of discussion excluded by the parties 100 bb) Cases of legal exclusion of the benefit of discussion... 100 (i) Debtor's bankruptcy 101 (a) Declaration of bankruptcy 101 (B) Factual bankruptcy 101 (ii) Impossibility to sue in Spain 102 cc) Final remark 102 2. Benefit of division. Special benefit for co-guarantors 103 3. The right to set up defences (eccezioni/excepciones) 103

XX a) The right of the guarantor to set up the defences deriving from the contract of guarantee 103 b) The right to set up the debtor's defences 104 aa) In general 104 bb) Exception: the defense by reason of minority or disability of the debtor 104 cc) The guarantee of a co-debt 106 dd) Waiver of the right to set up defenses 106 (i) Validity of the waiver and consequences 106 (ii) Construction of the waiver 108 4. Right to make agreements with the creditor 108 5. Right to remain unaffected by the agreements taken between creditor and debtor 108 E. Relationship between the guarantor and the debtor 109 I. Introduction 109 II. Duties of the guarantor before performance 110 1. Guarantor's duty to notify the creditor's request or his own intention to perform in order to prevent unjustified enrichment.110 2. Duty of the guarantor to set up the debtor's defences 110 III. Rights of the guarantor before performance 111 1. Guarantor's right to be informed about payment performed by the debtor 111 2. Guarantor's right to request for release 111 a) In general 111 b) Guarantor's right to claim for release 112 c) Conditions for release 113 aa) General condition 113 bb) Specific conditions: cases for relief 114 (i) In general 114 (ii) Detailed consideration of the cases for release 114 (a) The guarantor has been sued for payment 114 (p) The debtor is bankrupt or insolvent 115 (aa) Meaning of "insolvency" 115 (PP) Insolvency of the debtor 116 (y) The debtor is bound to release the guarantor from his guarantee within a given term and the term has expired 117

XXI (8) The debt has become due because the term within which it should have been paid has expired 117 (e) At the end of five years in Italy and ten years in Spain, when the principal obligation has no fixed term 117 d) Debtor's defences against the guarantor's claim for release 118 e) Consequence of no release: damages 118 IV. Rights of the guarantor after performance 118 1. In general 118 a) Duality of claims: reimbursement and subrogation 118 b) Differences between subrogation and reimbursement 119 aa) The nature of the claims 119 bb) Extent of the claims 119 cc) Prescription of the claims 120 c) Cumulative or alternative claims 120 2. Subrogation 121 a) In general 121 b) Payment to the creditor as requirement for subrogation 121 c) Content of the right of subrogation 122 aa) In general 122 bb) Subrogation into the creditor's security rights 122 cc) Items excluded from subrogation 123 d) Partial subrogation upon partial performance 123 e) Effectiveness of the subrogation 124 f) Protection by the law of the right of subrogation 125 g) Waiver by the guarantor to his right of subrogation 125 3. The claim for reimbursement 125 a) Source of the claim: the relationship between debtor and guarantor 125 b) Payment to the creditor as requirement for reimbursement... 126 c) The content of the claim for reimbursement 126 aa) The total amount of the debt 126 bb) Costs after notifying the debtor of the demand for payment against him 127 cc) Damages, when appropriate 127 d) Defences of the debtor against the claim for reimbursement 128 aa) Debtor's defenses against the creditor may be set up against the guarantor 128

XXII (i) In general 128 (ii) Requirements 128 (a) Guarantor's duty to inform the debtor about his intention to perform 128 (P) Defences at the moment of guarantor's performance 129 (iii) Exceptions 129 (a) Lack of defences 129 (P) Defences already set up 130 bb) Debtor's defences against the guarantor for anticipated payments 130 cc) Defence for a double payment 130 (i) The guarantor performs without notifying the debtor 130 (ii) The debtor performs without notifying the guarantor 130 F. Extinction of the guarantee contract 131 I. Causes of extinction of the guarantee 131 II. The extinction of the underlying obligation as the reason for the extinction of the guarantee: the indirect causes of extinction 133 1. Extinction of the guarantee upon performance of the underlying obligation 133 a) Payment to the creditor 133 aa) Payment by the debtor 133 bb) Payment by a third party 133 cc) Typical cases of performance by third parties 134 (i) A joint and several co-debt 134 (ii) The third party performs for the account of the guarantor 134 (iii) Payment performed in good faith to the person in possession of the title 134 dd) Void or undue payment 135 ee) Partial payments 135 ff) Imputation of the payment performed by the debtor 135 (i) In general 135 (ii) Imputation in the case of a debt partially secured with a guarantee 137 (iii) Imputation of a partial payment in the case of a guarantee for a limited amount 137 (iv) Imputation in the case of a debt secured with different guarantees 137

XXIII b) Alternative legal ways for performance (surrogati del pagamento/subrogados del pago) 138 aa) Tender and deposit (deposito/consignacidn) 138 bb) Set-off (compensazione/compensacion) 138 cc) Assignments of assets (prestazione in luogo deh'adempimento/ dacion en pago) 139 2. Extinction of the guarantee by release of the debtor (condonazione/condonacion) 139 a) In general 139 b) Acceptance to be released 140 c) Partial release 140 d) Pactum de non petendo 140 3. Extinction of the guarantee by novation of the secured debt (novazione/novacion) 141 4. Extinction of the guarantee by confusion between the creditor and the debtor 141 5. Extinction of the guarantee by prescription 142 a) In general 142 b) Interruption of prescription of the secured debt 142 III. The extinction of the guarantee obligation: the direct causes of extinction 143 1. Payment by the guarantor 143 a) In general 143 b) Imputation of the payment 143 2. Alternative legal ways for the guarantor to perform (subrogados del pago/surrogati) 143 a) Tender and deposit (deposito/consignacion) and assignment of assets (prestazione in luogo dell' adempimento/dacion en pago) 144 b) Set-off (compenssazione/compensacion) 144 aa) Set-off by the guarantor of his own claims 144 bb) Moment in which a set-off may be raised 145 c) Release of the guarantor (condonazione/condonacion) 145 aa) In general 145 bb) Effects of the release in case of co-guarantee 145 (i) Controversy regarding art. 1850 Spanish CC 147 3. Novation 147 4. Confusion 148 a) Confusion between the guarantor and the debtor 148

XXIV b) Confusion between debtor and one of the joint and several co-guarantors 150 c) Confusion between the creditor and the guarantor 150 d) Confusion between the creditor and one of the guarantors in the case of a plurality of independent guarantees 151 e) Confusion between the creditor and one of the co-guarantors 151 aa) Co-guarantors that are separately liable (mancomunidad) 151 bb) Co-guarantors that are joint and severally liable (solidarieta/ solidaridad) 151 cc) Confusion between co-guarantors 153 dd) Exception to the confusion 153 5. Prescription 153 IV. Special causes of extinction for the guarantee 154 1. Release of the guarantor by reason of the impossibility to subrogate caused by the creditor 154 a) In general 154 b) Requirements for release: a harmful act of behaviour on the part of the creditor 155 aa) In general 155 bb) The act of the creditor: active and passive 156 cc) Damaging effect: loss of the right to subrogate 157 c) Behaviour of the guarantor 158 d) Waiver by the guarantor of his right to be discharged 159 2. Extinction of the guarantee for future debts 160 a) In general 160 b) Requirements for the application of art. 1956 Italian CC 161 i) The creditor extends credit 161 ii) The financial situation of the debtor has become such as to make it difficult for the debt to be performed 161 iii) The creditor is aware of the financial deterioration of the debtor's position 162 c) Authorisation by the guarantor to the creditor to grant credit despite the financial difficulties of the debtor 162 d) Waive by the guarantor of the right granted in art. 1956 Italian CC 163 e) The principle of good faith in the guarantee for future obligations under Spanish Law 164

XXV 3. Extinction of the guarantee by reason of time. Discharge of the guarantor after maturity of the underlying obligation (scadenza dell'obbligazione garantita ed inerzia del creditore) 165 a) In general 165 b) The extinction of a guarantee agreed without time limit 166 aa) In general 166 bb) Global guarantees and guarantees for future debts without time limit 167 c) Extinction of the guarantee limited to the moment of maturity of the underlying obligation 169 d) Extinction of the guarantee agreed with a specific time limit 169 e) The terms established in art. 1957 Italian CC 171 f) Requirements to avoid the extinction of the guarantee within the given term 172 aa) In general 172 bb) An action against the debtor 172 cc) Diligent pursuit by the creditor prevents the extinction 173 g) Art. 1957 Italian CC: a non mandatory rule 174 aa) Validity of the waiver of art. 1957 Italian CC 174 bb) Form of the waiver: express or tacit 175 4. Extension of time (prorroga) 175 a) Extension of time in the Spanish regulation 175 aa) In general 175 bb) Explicit extension of time and tolerance for the nonperformance by the debtor 177 cc) Practical application 178 dd) Extension of time established by law (proroga/ prorroga) 178 ee) The consent of the guarantor to the extension of time for the secured debt 179 ff) Good faith and consent 180 b) Extension of time in other regulations 180 G. Spanish foral laws and the guarantee contract 182 I. The plurality of co-existent civil law regimes in the Spanish territory 182 II. The contract of guarantee in the foral laws 183 1. The regulation on the guarantee in the region of Navarre 183

XXVI 2. Aragon 184 3.Cataluna 184 4. TheBalearics 185 Chapter 3: Other typical personal security rights under Italian and Spanish law 186 A. The mandate to provide credit for a third party 186 I. The basic concept of mandate to provide credit 186 II. Historical background: Roman Law 186 III. Evolution of the mandate to provide credit in Europe. Current situation 188 IV. Legal provisions applicable to the m.p.c 189 1. Legal provisions on the m.p.c 189 2. The rules on the mandate applicable to the m.p.c 190 3. Regulation on the contract of guarantee 190 V. Parties to the contract 191 1. The mandatory 191 2. The mandator 191 VI. Conclusion of the contract 192 1. Mandate 192 2. Acceptance 193 VII. The object of the contract 194 VIII. Relationships between the parties to the contract 194 1. In general 194 2. Rights of the mandator vis-a-vis the mandatory 196 a) Right to the performance of the mandatory on the agreed terms 196 b) Right to be released from his guarantee obligation 196 c) Right to be informed: "render of account" 197 d) Right to be subrogated in the rights of the mandatory 197 e) Right of the mandator to revoke the mandate 197 3. Rights of the mandatory vis-a-vis the mandator 197 a) Right to performance of the mandator upon default of the beneficiary 197 b) Right to perceive the remuneration stipulated 197

XXVII c) Right to recover costs which are separate from the provision of funds 198 d) Right to be indemnified for the damages suffered due to the performance of the mandate 198 e) Right to be discharged of the duty to grant credit 198 f) Right to waive the contract 199 IX. Extinction of the m.p.c 199 1. Revocation by the mandator 199 2. Waiver by the mandatory 200 3. Death 201 a) Death before the performance of the mandate 201 b) Death after the performance of the mandate 201 4. Supervening incapacity 202 5. Insolvency 202 6. Exception in case of enterprises 202 X. Function of the m.p.c 203 XI. Similar security rights to the m.p.c 203 1. The m.p.c. and the letter of comfort 203 2. The m.p.c. and the documentary credit 204 3. The m.p.c. and the letters of payment (Cartas orden de credito) 205 XII. Legal nature of the m.p.c 206 1. The m.p.c. as a contract of guarantee 206 2. The m.p.c. as a contract of mandate 207 3. Autonomous legal nature of the m.p.c 209 XIII. Convenience to regulate the m.p.c. in Spanish legislation 209 B. Guarantee for a bill of exchange (l'avallo/ el aval cambiario) 210 I. The basic concept of guarantee for a bill of exchange 210 II. Terminological uncertainty in Spain 210 III. Legal nature and regulation 211 C. The contract of guarantee insurance 213 I. The basic concept of guarantee insurance 213 II. Relations between the parties to the contract 213

XXVIII 1. Relationship between the debtor and the creditor 213 2. Relationship between the debtor and the insurer 213 3. Relationship between the insurer and the creditor 214 III. Economic function of the guarantee insurance 214 IV. Types of guarantee insurance contracts 214 1. Guarantee insurance required by law 215 a) Insurance contract in favour of the public administration 215 b) Insurance contract to guarantee sums of money invested in the construction of a private residence 215 c) Guarantee insurance against property damage caused by construction deficiencies or defects 217 2. Guarantee insurance by agreement of the parties 217 V. Legal nature of the guarantee insurance 217 1. The insurance elements in the contract of guarantee insurance 218 a) Insurance company 218 b) Indemnifying character 218 2. The guarantee elements in the contract of guarantee insurance 219 a) Guarantee insurance on first demand 220 b) Guarantee insurance as a dependent guarantee 220 3. Conclusions and law applicable to the guarantee insurance 221 D. The contract of credit insurance (assicurazione di credito/seguro de credito) 222 I. The basic notion and legal nature of the credit insurance 222 II. Historical evolution and economic function in contemporary commercial activity 222 1. Historical background 222 2. Economic function 222 a) Commercial use of credit insurance 222 b) Recent use of credit insurance in banking practice: Mortgage Insurance 223 III. Legal nature of the credit insurance 225 IV. Legislation applicable to credit insurance contracts 225

XXIX Chapter 4: Plurality of security rights 227 A. Relationship among sureties in case of concurrency 227 I. In general 227 II. Constellations of plurality of security rights 227 1. Plurality of personal security rights 227 a) The co-guarantee (confideissione/co-fianza) 227 b) Plurality of personal guarantees independent from each other 228 c) Legal regulation of both cases 228 2. Plurality of personal and real securities 229 III. Relationship of the different sureties vis-a-vis the creditor 229 1. Order of payment 229 2. Extent of liability of each one of the security rights 231 a) In the co-guarantee 231 aa) Regulation 231 bb) In the business practice 233 (i) Express agreement of the parties 233 (ii) Construction of unclear contractual terms 234 b) In the case of plurality of security rights (personal and real) 235 3. Defences 235 a) In the co-guarantee 235 b) In the case of plurality of security rights 236 IV. Internal relationship among the different sureties 236 1. Internal relationship among co-guarantors 236 a) Right of recourse 236 b) The case of insolvency of one of the co-guarantors 239 c) The right of the co-guarantors to set up defences against other co-guarantors 239 2. Internal relationship between a plurality of sureties that are independent from each other 239 a) Plurality of guarantees, independent from each other 239 b) Plurality of personal and real securities independent from each other 240 c) Possible solutions to the unfairness of the lack of right of recourse among sureties 241 aa) In general 241

XXX bb) Solution based on the principle of bona fides 241 (i) Application in neighbouring countries 241 (ii) Application of the "Bona Fides" solution in Spain. Difficulties 242 (iii) Consequences of the application to this solution... 243 cc) Solution for a special case. Concurrency of guarantee and other security rights 244 V. Concurrency of a contract of guarantee and an assumption of debt 246 1. In general 246 2. Assumption of debt for security purpose 246 VI. Concurrency of guarantee contracts and letters of comfort 247 Chapter 5: Personal security rights as Credit Risk Mitigators in the Basle II Accord and in the Capital Requirements Directive 248 Introduction 248 A. The New Basel II Accord and the Capital Requirements Directive 250 I. A risk sensitive banking regulation for a changing environment 250 II. The goal of the Basel II Accord and the three pillars methodology 251 B. Recognition of Credit Risk Mitigation Techniques: an achievement of the Basel II Accord 253 I. Capital relief through the use of Credit Risk Mitigation Techniques (CRM) 253 II. The concept of CRM, unfunded credit protection and guarantee 254 1. The concept of CRM: broad and comprehensive 254 2. The concept of unfunded credit protection 254 3. The concept of guarantee under the CRD 255 III. The regulation of CRMs in Basel II and the CRD 256 1. In general 256 2. Application of CRMs for capital relief: distinction between IRB and RSA banks 256 3. Minimum requirements for CRMs to be recognised for capital relief 257

XXXI a) Requirements related to the CRM provider 257 b) Specific minimum requirements for "Guarantees" to qualify as a CRM under RSA approach 258 c) Specific minimum requirements for "Guarantees" to qualify as a CRM under IRB approach 260 4. Possibilities to develop new CRMs under Basel II: scope for innovation? 261 Chapter 6: Security rights in the EU context: market implication and harmonisation of EU Private Law 263 Introduction 263 A. Security rights in the current EU context. Law and Economics 263 I. EU policy action in view of enhancing credit and its impact on security rights 263 II. The impact of the financial crisis on EU law, credit and security rights 264 B. EU private law and its impact on security rights 266 I. How are security rights affected by EU private law 266 1. EU Law: The role of Directives and the need to harmonise the acquis communautaire 266 a) The EU acqui and the particular relevance of consumer protection for sureties 266 b) The need for a more coherent acquis communautaire 269 II. Further harmonisation of EU private law 270 1. Non-legislative harmonisation of European contract law. Harmonised protection for sureties through the horizontal effect of fundamental rights 270 2. Legislative harmonisation of EU private law 271 a) Political action 271 aa) Improving the acquis communautaire: The Common Frame of Reference and the Green paper on the Review of the Consumer Acquis 272 (i) The Common Frame of Reference (CFR) 272 (ii) Revising the consumer acquis: Green Paper on the Review of the Consumer Acquis and the Commission's Proposal for a Directive on consumer rights 273

XXXII (iii) Prospects on coming EU law: protecting sureties and consumers of financial products and its impact on market integration 274 bb Optional instrument: Opting-in a unified code? 274 b) The academic action 275 aa) An overview 275 bb) The Draft Common Frame of Reference (DCFR) and its predecessors 277 cc) Academic attempt to harmonise the law of security rights: Study Group on a European Contract Law and its integration in the DCFR 278 C. Should we attempt to harmonise EU Personal Security Rights? 279 D. Final consideration: comparative law of security rights in view of current EU developments 281 Table of Statutes: Italian and Spanish Law 283 Rules on the Guarantee in Italian Civil Code (Bilingual) 285 Rules on the Guarantee in Spanish Civil Code (Bilingual) 292 Rules on the Guarantee in German Civil Code (Bilingual) 300 Charts 305 Bibliography 313 Index 327