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ARTICLE · 05 JULY 2011

Fully Secured @ Gowlings - June 28, 2011 - Volume 2, Number 2

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Fully Secured @ Gowlings - June 28, 2011 - Volume 2, Number 2

CanadaFinance and Banking
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Edited by Mr Richard Dusome


A Banker Asked Us: Cash Collateral Securit

By: Richard Dusome (Toronto)

(416) 862-5423

[email protected]

Q: A new customer is looking for the bank to issue a letter of credit secured by cash collateral held in an account with the bank in Ontario. If my customer signs the bank's cash collateral agreement and deposits the funds into the account, do I have everything I need to have first priority to the funds?

A: In Ontario, funds on deposit in a bank account are considered to be an "intangible" for PPSA purposes, not "money". Unfortunately, a security interest in intangibles cannot currently be perfected by possession or control. To perfect the bank's security interest in the funds on deposit with the bank, the bank will need to make a registration under the Ontario PPSA, and verify whether there are any prior registrations charging the same collateral or claiming a security interest in "Accounts" or

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