From 30 June 2006, international bearer debt securities issued by certain issuers which are intended to be recognised as "eligible collateral" for the purposes of Eurosystem monetary policy and intra-day credit operations will, amongst other things, be required to be issued pursuant to what is known as the New Global Note structure.

The New Global Note structure is a new legal and holding structure for international debt securities issued in global bearer (but not registered) form through the International Clearing System Depositaries (the "ICSDs") of Euroclear Bank and Clearstream Banking.

The key distinguishing features of the New Global Note structure from the currently used classic Global Note structure are that:

  1. the outstanding amount due under an issue of securities will be recorded by the ICSDs and not on the bearer global note itself; and

  2. the role of the common depositary will now be split so that the global note will be kept safe until maturity by a common safekeeper (which must be one of the ICSDs in order for the securities to form "eligible collateral") and will be serviced by a common service provider (which will undertake all other functions that are performed by a common depositary in the classic Global Note structure and will liaise with the ICSDs on behalf of the issuer regarding the outstanding amount due under an issue of securities).

As a result of the introduction of the New Global Note structure, issuers under note programmes that wish securities issued from 30 June 2006 to be able to constitute eligible collateral, thus potentially improving their marketability, will need to update their programmes to take account of the New Global Note structure. Similarly, issuers of stand alone bonds from 30 June 2006 who wish their securities to be able to form eligible collateral will need to ensure that the New Global Note structure is followed at the time of issue.

Other eligibility criteria for securities to constitute eligible collateral include but are not limited to the requirements that the securities must be issued (or guaranteed) by entities established in the EEA or in non-EEA G-10 countries and that the securities must be denominated in euro.

Although the New Global Note structure will be a pre-requisite for certain securities to be capable of forming eligible collateral, it should be noted that securities that are not intended to form eligible collateral may still be issued pursuant to the existing classic Global Note structure and that international bearer debt securities may still be issued in the New Global Note form even if they are not intended to form eligible collateral for the purposes of the Eurosystem operations.

Further information is also available on the website of the International Capital Market Association (ICMA) .

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

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The original publication date for this article was 19/06/2006.