Request for proposal and Structural subordination: Difference between pages

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imported>Doug Williamson
(Change "company" to "customer" to generalise; broaden to non-banking services.)
 
imported>Administrator
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(RFP).  
''Risk management''.
An effective reduction in the ranking of the claim of a lender or other creditor resulting from a combination of:
(1) The ownership structure of the borrower, for example in a group of companies; and
(2) Holding a claim against the 'wrong' legal entity.


== RFPs in banking ==
For example, the claims of the creditors of a holding company may become structurally subordinated to the claims of creditors of the subsidiary companies in the same group.  This is because the claim of the holding company itself - as a shareholder of the subsidiary - is generally subordinated to the claims of the other creditors of the subsidiary.


An request for proposal is a formal tender which communicates a customer’s requirements to the banks who are being asked to bid.  
This can be particularly problematic where the subsidiary is in a different country from the holding company, where local legal and other claims may effectively erode the position of the holding company's creditors.


The RFP is used to facilitate selection of a service or goods provider.
== See also ==
 
* [[Subordination]]
 
== RFPs more generally ==
 
By analogy, similar communications in relation to non-banking services.


== See also ==
* [[Request for information]]

Revision as of 14:20, 23 October 2012

Risk management. An effective reduction in the ranking of the claim of a lender or other creditor resulting from a combination of: (1) The ownership structure of the borrower, for example in a group of companies; and (2) Holding a claim against the 'wrong' legal entity.

For example, the claims of the creditors of a holding company may become structurally subordinated to the claims of creditors of the subsidiary companies in the same group. This is because the claim of the holding company itself - as a shareholder of the subsidiary - is generally subordinated to the claims of the other creditors of the subsidiary.

This can be particularly problematic where the subsidiary is in a different country from the holding company, where local legal and other claims may effectively erode the position of the holding company's creditors.

See also


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