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Maja Jovančević Šetka, partner ⃰ at Karanović & Nikolić's Banking & Finance practice group, held a presentation titled "Risk Participation Agreement – Collateral or Derivative, Implementation of the Law on Foreign Exchange Operations" at a symposium for lawyers in Serbian banks. Organised by the Association of Serbian Banks, the conference was held at Lake Palić in Serbia, on the 8th and 9th of March, under the title "The Status of Banks and Legal Protection".
Attended by more than 60 participants – leading professionals from the legal and banking sector, the Symposium fostered intensive, interactive discussions concerning topics about current banking practices.
The presentation analysed risk participation agreements as a technique for alleviating the credit risk of banks. Central to the topic were the legal aspects from the perspective of banking regulations, specifically the Decision on the Capital Adequacy of Banks, and the treatment under the Law on Foreign Exchange Operations.
Risk participation agreements are not regulated as such in Serbian law, so identifying their legal nature from a local law perspective is the first question that needs to be resolved. The presentation discussed the concepts of treating risk participations as the type of security or guarantee, a credit derivative or a sui generis legal institute.
The conclusion was that, in general, the current legal framework does not contain obstacles for the use of standard risk participation agreements. However, to enable proper functioning of this instrument in practice and to ensure legal certainty, the official position of the National Bank of Serbia as regulator is needed.
Apart from risk participations, the discussion touched upon funded participation arrangements and their treatment in a cross-border context.