Legal and Regulatory Challenge in Collateral enforcement in International Banking Law

Abstract

The present study discusses legal and regulatory challenges in the collateral enforcement in international banking law. As a legal issue that prompted the research, there is regrettably noted that this law does not safeguard rights of the debtor at all. Indeed, what is sought in the process of collateral enforcement is the sum corresponding to the debt amount regardless of the real value of the property belonging to the debtor. This prejudices the debtor to the extent that there is met cases where a mansion valued at 150million of Rwandan francs is auctioned at 50 million just to get the 40 million owed to the bank and the debtor remained with a tiny amount in the indifference of the creditor inconsistently in accordance with the provisions of Article 9 of the Uniform Commercial Code, which covers all transactions, regardless of their structure, that aim to establish a security interest in fixtures or personal property. The creation of a security interest is specifically governed by section 9-203.The Code lists three requirements for an enforceable security interest: (a) an agreement creating the security interest as evidenced either by the secured party' possessing the collateral, or by the debtor signing a security agreement' describing the collateral; (b) something of value must be provided; and (c) the party owing the money must officially own the collateral. While there is no hard and fast rule about the sequence in which these conditions must be satisfied, they must all be satisfied. After all the necessary conditions are met, the security interest is said to be attached to the collateral and may be enforced against the debtor. After attachment, the security interest may be made enforceable against third parties by perfection. To what extent rights recognized to debtors re daily infringed in the collateral enforcement? What are issues arising from the collateral enforcement in banking law? What are mechanisms likely to ensure an effective collateral enforcement to more protect debtors? the main objective of this work is to assess the effectiveness of the Rwandan legal and regulatory framework in the protection of debtors during the collateral enforcement process. Specifically, it intends to determine the extent to which rights of the debtor are put aside in the Rwandan legal regime of collateral enforcement; to set out are issues arising from the collateral enforcement as governed by the Law No 22/2018 of 29/04/2018 relating to the civil, commercial, labor and administrative procedure and to propose strategies to ensure the protection of the debtor during the collateral enforcement process. To make successful the research and achieve those objectives, it was necessary to resort to documentary technique by reading different books, legal instruments and electronic documents. Besides, different methods were used such as historical method, comparative method, exegetic method, analytical method and synthetic method.