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The Risk of Mortagage in Commodities Finance and the Response to It

Author: XiaoJie
Tutor: ChenNianBing
School: South China University of Technology
Course: Legal
Keywords: Commodities finance mortagage risk response
CLC: D923
Type: Master's thesis
Year: 2010
Downloads: 71
Quote: 0
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Abstract

As it is defined by The BaselⅡ, commodities finance refers to a kind of structural short-term credit which is based on stockpile, stock-in-trade or commodities traded in exchange(such as oil, metals or grain, etc). This short-term financing business is experiencing a rapid boom especially in domestic commercial bank in recent years and its legal foundation lies in mortagage of commodities. In terms of the borrower, commodities finance is a highly efficient way to make the stockpile movable again, which in the prosess solves the financing problem of the enterprise, and it prevents the corporations from the market value risk of the commodity. However, in terms of the commercial bank, commodities finance may have certain negative impact over the security of credit assets of the commercial bank in several ways since the commodity itself is involved in a dynamic operating process, which may lead to legal dispute. Thus, this article emphasizes on the discussion over the mortagage risk in the commodities finance business, and seeks to propose pertinently preventing advices over the mortagage risk in the commodities finance on both the operating level and the legislating level and expects to benefit the practice of commodities finance in our country. Through a brief introduction to the commodities finance, the first part of this article analyzes mortagage pattern of it and also concludes the characteristic of the mortage in it and contrasts it with traditional mortagage. The second part mainly analyzes the major mortagage risk in the commodities finance and its causes, which lies mainly in security and contracts. The specific content includes the transfer of possession,“rolling mortagage”, the competetion of property rights secured by movable assets, the legal nature of regulatory agreement, the allocation of responsibilities in multi-party agreement. The third part seeks to propose pertinently preventing advices over the mortagage risk in the commodities finance on both the operating level and the legislating level.

The Risk of Mortagage in Commodities Finance and the Response to It

Abstract

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