Spens clause and Trans-European automated real-time gross settlement express transfer: Difference between pages

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A potentially strong form of protection for lenders/investors in securities, designed to mitigate the adverse effects of call risk for investors.
(TARGET).  


Under a Spens clause the borrower/issuer has to value the cash flows beyond the date of the call/redemption at the government bond yield, or some other low rate.
A payment system composed of one real-time gross settlement (RTGS) system in each of the countries of the European Union (EU) plus a number of non-EU countries and the European Central Bank (ECB) payment mechanism.  


This potentially makes it prohibitively expensive for the issuer to take an early redemption.


For example the Bank of England's purchase scheme for corporate bonds favours bonds having a Spens clause.
The domestic RTGS systems and the ECB payment mechanism are interconnected according to common procedures (interlinking) to allow cross-border transfers throughout the EU to move from one system to another.


The consequence of a Spens clause for the investor is that they can re-invest the redemption monies in government stock, thus preserving their originally expected cash inflows at lower risk.


== See also ==
* [[European Central Bank]]  (ECB)
* [[Gross settlement system]]
* [[Interlinking]]
* [[Payments and payment systems]]
* [[Real-time]]
* [[Real-time gross settlement system]]
* [[TARGET2]]


== See also ==
[[Category:Cash_management]]
* [[Call protection]]
* [[Call risk]]
* [[Loan agreement]]
* [[Make whole clause]]

Revision as of 00:12, 12 March 2023

(TARGET).

A payment system composed of one real-time gross settlement (RTGS) system in each of the countries of the European Union (EU) plus a number of non-EU countries and the European Central Bank (ECB) payment mechanism.


The domestic RTGS systems and the ECB payment mechanism are interconnected according to common procedures (interlinking) to allow cross-border transfers throughout the EU to move from one system to another.


See also

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