Account Control Agreements

An admission by the custodian bank that DACA must certify the lender`s “control”; A statement from the deposit-making bank that the accounts concerned are “deposit accounts”; An agreement by the deposit-taking bank not to change the name or number of the deposit account without the lender`s written consent; An agreement between the deposit bank and the borrower to notify the lender before the closing of the deposit accounts and allow the lender to adopt a new DACA for all deposit accounts in which the borrower could defer cash security; and – An agreement of the deposit bank to subordinate all the pledge fees it has to the account and waive its right of clearing on the deposit account, with the exception of the amount of deposits credited to the account that are not repaid and the ordinary service charges charged by the deposit bank. Deposit account control agreements (DACAs) are too often misjudged by a deposit-taking institution that signs them. It is all too common for a custodial institution to lack appropriate controls, including the involvement of consultants, if any, to protect the interests of the custodian institution when signing and implementing a DACA. This is in stark contrast to lenders who typically hire consultants to thoroughly audit and process DACA, to ensure that the lender`s security interest in all deposit accounts is enhanced, and to transfer exposure to the deposit facility under the DACA. The result is that a deposit-making institution may be exposed to significantly higher risk than is necessary when the DAC closes. Advanced Security Interests – During the execution of the DACA, the insured party will be granted an advanced security interest that granted it, under the Single Code of Commerce, exclusive rights to control the debtor`s deposit account. First, there are two types of account control agreements: assets and liabilities. Therefore, the borrower must indicate whether he transfers full control to the lender and does not need access to the deposit account, or if he wishes to have access until the lender is able to share exclusive control of the custodian institution, the lender assumes exclusive control and the borrower is no longer able to access the account or accounts. The lender usually gives such a notification in case of delay. A lender can establish “control” in one of the following ways: (i) the borrower holds his deposit account directly with the lender; 2. The lender becomes the effective owner of the borrower`s deposit accounts with the borrower`s custodian banks; or (3) the lender and borrower enter into a deposit account control agreement (known as DACA) with the borrower`s deposit bank.

These agreements apply in all cases in addition to the guarantee agreement by which the borrower grants a security interest on his deposit accounts.

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