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Dutch Central Bank eases "PMP requirement" for Dutch Borrowers
On 2 January 2005 a restatement of the policy rule of the Dutch Central Bank under the Dutch Banking Act became effective. Under the new policy rule Dutch borrowers may rely on an explicit confirmation of the lenders that they qualify as "professional market parties" (PMP's), unless it knows or should reasonably know that the confirmation is incorrect.
Under section 82 of the Dutch Banking Act a Dutch borrower may - in short - only borrow funds from PMP's. Under the former policy rule Dutch borrowers were required to verify the PMP-status of their lenders and their transferees on the basis of information from government regulators, rating agencies, auditors and other independent sources.
The revision addresses criticism by banks and the legal profession. It may in itself not be sufficient that the lenders confirm their PMP-status by means of a provision in the credit agreement. The policy rules requires Dutch borrowers to verify that the lenders expressly agree with the confirmation and are aware of the consequences thereof. A practice for dealing with this new requirement has yet to be developed. A solution may be that the lenders issue a separate confirmation to the Dutch borrower that they qualify as a PMP's.
The new policy rule no longer requires that the economic interest in the claims resulting from the loans should at all times be held by PMP's. As a consequence, the Dutch PMP requirement will in principle no longer apply to the granting of (economic) sub-participations.
For further information on this subject you may contact Stefan van Rossum
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