Structural subordination and Trans-European automated real-time gross settlement express transfer: Difference between pages

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''Risk management''.
(TARGET).  


An effective reduction in the ranking of the claim of a lender or other creditor resulting from a combination of:
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 ownership structure of the borrower, for example in a group of companies; and
#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.
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.


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 ==
* [[Gross settlement system]]
* [[Interlinking]]
* [[Payments and payment systems]]
* [[Real-time gross settlement system]]
* [[TARGET2]]


== See also ==
* [[Subordination]]


[[Category:Financial_risk_management]]
[[Category:Cash_management]]

Revision as of 16:57, 3 January 2018

(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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