loan to the borrower when required by the loan agreement and this exposure may attract a capital adequacy requirement. Novation may amount to a complete substitution of the new bank or rather as an assignment of the rights of the old bank and the assumption by the new bank of obligations under the loan agreement plus the release of the old bank. The difference between the two is that a novation cancels old loans completely (which might have adverse effects on any security for the loan unless held by a trustee for the banks) whereas an assignment and assumption preserves the old loans and their security. Other obligations of a bank which may be transferred in this way are obligations to indemnify the agent and obligations under a pro rata sharing clause. In the case of assignments of rights, it may be a requirement that the assignee assumes these obligations to the existing banks. The contractual mechanics of the novation are that the agent bank is authorised by the borrower and the banks in the credit agreement to sign the scheduled novation certificates on behalf of the borrower and the banks so that all parties are bound. Conflict between Lenders There are four potential causes of conflicts between lenders: Co-ordination Decision making requires coordination. Bonds are widely dispersed and the holder's identity is often unknown to the issuer or other bond holders due to the intermediate holding of securities. Scheme of arrangement require majority in number (head-count test) whereas if bonds are issued on a global note there is only one true creditor with sub participation through trusts. The solution to this problem is to develop inter-creditor agreements. To overcome the head-count test issues in bonds: bondholders can be given definite notes (although costly) or on the basis of this right be perceived as contingent-creditors. Tragedy of the Commons Hardin writes that Individual management and enforcement of the loans/bond increases individual monitoring costs, enforcement costs and facilities wealth destruction due to premature acceleration of loan/bond and enforcement of security. Collective issues can be addressed again by the inter-creditor agreements. Management and enforcement is in principle vested in a single individual in order to reduce monitoring costs and value distraction. This is a crucial concept within insolvency, which is primarily concerned with BONDS: Individual action by bond holders is not allowed. This is personified by a no-action clause unless the trustee