AN OVERVIEW OF SECURITY CLASSIFICATIONS IN BANK LENDING

AN OVERVIEW OF SECURITY CLASSIFICATIONS IN BANK LENDING

Author by Prof. Pius Olanrewaju

Language: English

Abstract

The backbone of any nation is the enterprising activities of its populace and the greatness of nations are measured by how enterprising its citizens and, in fact, inhabitations are. Enterprises live (and sometime die) by credit. The question which any lender has to consider is whether he can be sure that his loan will be repaid on the date. For this, the proven quality of the debtor company’s management over the years may be sufficient assurance without the need for any special safeguards, but even well-run companies can be seriously affected by events over which they have little control. If a borrower is unable to trade out of his difficulties and is forced into liquidation and liabilities substantially in excess of assets, how is the lender to ensure that he or it will nevertheless be paid in full? It is precisely to this end that security is taken . Therefore, a security is expected to give the lender protection, assurance and indemnification. The body of this paper is segmentalised into five main parts. A necessary starting point in the discussion of this topic is the conceptual definition of inherent terms. In addressing the conceptual definitions of words inherent in this topic being a subject of global phenomenon, an attempt has been made in this paper to view the words from the perspective of learned writers who present the understanding of the subject from different dimensions. Going to the mainstream of this paper, it presents classification of securities in the approaches adopted by major writers on the subject. Also, the classification is viewed from the perspective of the understanding set out in the Uniform Act of the Organisation for the Harmonisation of Business Law in Africa. Other segments of this paper deal with the reasons for classification, its prospects on one hand and the challenges posed is on the other hand.


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