Difference between security and quasi-security
Difference between security and quasi-security

The following Banking & Finance guidance note provides comprehensive and up to date legal information covering:

  • Difference between security and quasi-security
  • Why take security and/or quasi-security?
  • What is security?
  • What is quasi-security?
  • How do security and quasi-security differ?
  • Using security and quasi-security together

The terms security and quasi-security are frequently used in relation to finance transactions.

This Practice Note considers the term security in the context of security interests (eg a mortgage) which are created as collateral for a finance transaction.

Such security interests should not be confused with a 'security' or 'securities' in the context of the capital markets (both equity and debt). In capital markets transactions the term 'securities' refers to documents that evidences a debt or an investment. Securities in the context of capital markets are outside the scope of this Practice Note. For information on debt capital markets, see Practice Note: Introduction to the debt capital markets.

English law recognises four types of security (mortgages, charges, pledges and liens). A much broader range of arrangements could fall under the umbrella of quasi-security eg guarantees, comfort letters and set-off rights. Some lawyers even consider negative pledges to be a form of quasi-security.

This Practice Note explains:

  1. why lenders take security and/or quasi-security

  2. what security is

  3. what quasi-security is

  4. how security differs from quasi-security

  5. how security and quasi-security can be used together

Why take security and/or quasi-security?

A lender's primary concern is that it is repaid. Even if a lender obtains a judgment for payment of the sum owed to it by its borrower, this does not mean that a lender will be repaid