The The creation of in rem rights of pledge over cash pool accounts and the notion of ‘control’ under financial collateral agreements

Abstract

Financial collateral agreements on cash deposit accounts integrated in cash pooling agreements are at the intersection between the capital adequacy standards established in the Basel III Accords and the liberalization of payment services promoted by the second payment services directive (PSD2). In the Swedbank Judgment, the CJEU rules on the construction of the term ‘control’ as an essential requirement for financial collaterals and opts for the notion of ‘negative control’ first coined in the Gray and Lehman Brothers cases of the High Court of England and Wales. The ruling in Swedbank sets a milestone for cash pooling agreements because it disincentivizes to some extent the management of these contracts by financial institutions and opens the door to FinTech companies acting as third party payment service providers.